Private equity firms are hoping that the new Trump administration makes it easier for them access to something they have long wanted: your 401(k).
Wall Street investment giants view Main Street retirement savings as a way to boost demand for non-listed illiquid bets that aren’t traded on any public exchange.
Such investments include real estate funds, private credit, and leveraged buyouts of companies.
Typically, private equity firms such as Apollo (APO), Blackstone (BX), and KKR (KKR) pool money from high-net-worth individuals and institutional investors such as endowments and public pensions to make these bets. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
What they have long wanted to tap is more than $12 trillion currently housed in defined-contribution plans that workers rely on for their retirement nest eggs, such as 401(k)s.
At close: January 8 at 4:00:02 PM EST
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The Biden administration has not warmed to that idea, but industry watchers expect that to change under Donald Trump’s second term. He is expected to broadly loosen regulations that affect the world of financial services.
“We’ll make the case for a pro-growth regulatory regime that supports small businesses and provides more opportunity to everyday investors,” said Drew Maloney, president and CEO of private equity lobbying group American Investment Council.
The argument for such a change is that private equity funds could give everyday investors more diversification away from public markets and a shot at bigger returns — in exchange for some illiquidity.
Read more: How much should I contribute to my 401(k)?
The reasoning aligns with broader concerns many investors have over the historically high valuation of the current stock market and the concentration of Big Tech stocks. Of the top 10 companies in the S&P 500 index (^GSPC), all but Berkshire Hathaway (BRK-A, BRK-B) are tech giants. Together those 10 account for 37% of the index.
Marc Rowan, CEO of Apollo, has argued that too many investors are relying on the performance of too few public companies.
“Should we get access to 401(k) through broad-based reform or regulatory change or regulatory encouragement, I believe that would be upside not just for us but for the entire industry,” Rowan told analysts in November.
Today, both private and public assets carry risks and rewards, Rowan told Yahoo Finance later that same month, with more companies opting to go private than public.
“The biggest trend in our industry is investors, individual investors, and institutional investors looking at their fixed income bucket and saying to themselves, why is this 100% public?”