U.S. President Donald Trump has signed an executive order that aims to diversify assets in Americans' 401(k) retirement accounts.
New assets that could be allowed into workplace retirement plans include private equity, cryptocurrencies and real estate, opening the door for alternative asset managers to tap a greater share to trillions of dollars in Americans’ retirement savings.
In the executive order, the White House claimed that regulatory overreach has been stopping retirees from benefitting from potentially higher returns.
"My Administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving the competitive returns and asset diversification necessary to secure a dignified, comfortable retirement," the order said.
The move could reward both the US$5 trillion private equity industry and the emerging cryptocurrency industry, which has been strongly supported by Trump as it aims to become more mainstream.
Since Trump was elected, the price of bitcoin has nearly doubled and has reached US$116,542.
Some asset managers have showed support for the move, including BlackRock.
"Expanding access to investments long out of reach will help ensure millions of Americans build stronger, more diversified portfolios designed to increase savings and address the practical considerations of DC plan fiduciaries," Jaime Magyera, head of retirement for leading asset manager BlackRock said in a statement.
However the plan also has its critics, with some saying while these investments can offer tempting profits, they could also be a major risk for long-term retirement savings.
“The objective for the average person is to have a safe, secure retirement plan,” Jerry Schlichter, founding partner of Schlichter Bogard, a firm known for lawsuits on behalf of employees over excessive fees in 401(k) plans, said.
“When you talk about new areas like cryptocurrency or private equity, these are fraught with danger for investors for a variety of reasons.”
Schlichter said part of the concern is cryptocurrencies inclusion in the plans, as they haven’t been around long enough to prove themselves as a safe option for investors.
“There’s no long-term performance history for cryptocurrency, and the short- to intermediate-term has been all over the place,” Schlichter said.
“This is not the kind of investment that people want and deserve when they need to have something that’s protected for their years in retirement.”
Swan Bitcoin CEO, Cory Klippsten argues that its was inevitable that bitcoin would be included in American 401(k)’s.
“As fiduciaries realize bitcoin’s risk-adjusted upside over the long term, we’ll see growing allocations, especially from younger, tech-savvy workers who want hard money, not melting ice cubes,” he said.
