Thread by @_Investinq

🚨 Your 401(k) may soon fund Wall Street’s riskiest bets.

Trump is expected to sign an executive order that would open the door to private equity.

Behind the sales pitch? A ticking time bomb for retirement savers.

(Save this thread)

Let’s start with the basics.

A 401(k) is a retirement savings plan sponsored by your employer.

You contribute a portion of your paycheck, and in return, you (hopefully) build wealth over time typically through public investments like mutual funds and stocks.

Those investments are regulated, priced daily, and you can move in and out fairly easily.

That’s important. Most people expect their retirement savings to be liquid meaning accessible if needed.

Private equity flips that script.

Private equity (PE) refers to investing in companies that aren’t publicly traded meaning they aren’t listed on the stock market.

Instead, PE firms raise capital from investors, buy businesses, try to improve them, and eventually sell them at a profit.

Sounds great? Not so fast.

Private equity funds typically “lock up” your money for years sometimes 5, 7, even 10 years with very limited ability to withdraw. This is called illiquidity.

So if your 401(k) holds these assets and you want to move your money… you might be stuck.

Enter Trump’s executive order (EO). It doesn’t create a new law.

Instead, it tells federal agencies like the Department of Labor (DOL) and SEC to reinterpret the rules around what 401(k) plans can offer.

That might sound harmless but it opens a big door.

Under the law called ERISA, the Employee Retirement Income Security Act 401(k) managers must act in your best interest. This is known as a fiduciary duty, and it includes rules like:

• Prudence (make smart decisions)
• Loyalty (no conflicts)
• Diversification (don’t put all eggs in one basket)

This EO doesn’t change ERISA. But it nudges regulators to say: “Hey, maybe it’s okay if plans start including private equity as long as fiduciaries check the right boxes.”

That could mean more 401(k) plans start slipping private assets into your portfolio especially inside target-date funds.

Target date funds are default retirement options that adjust risk based on your age

Younger workers get more aggressive investments; older workers get more conservative ones

They’re widely used and that’s the wedge. If they add private equity to TDFs, it reaches millions of savers automatically

So what’s the appeal of private equity? The big pitch is higher returns. Some studies show PE outperforms public stocks over the long term.

But that edge often disappears when you factor in fees and PE fees are steep:

• 1–2% annual management fee
• 20% cut of the profits (called “carry”)
• Extra fund expenses

Compare that to ~0.3% for a public mutual fund.

And transparency? Basically none.

Public stocks report earnings quarterly. Private equity funds? They often rely on mark-to-model valuations meaning fund managers estimate how much their assets are worth, using internal formulas.

That means prices are:

• Updated infrequently
• Prone to stale values in downturns
• Potentially hiding losses

What happens in a recession?

Let’s say the private equity market drops. You won’t see the hit right away. Your 401(k) might still show the same value… until months or years later when the fund finally updates prices or sells assets possibly at a loss.

That’s deferred pain.

And if too many people want to exit? Funds can impose gates temporary limits on withdrawals. You might be told: “Sorry, we’re not processing redemptions right now.”

This isn’t hypothetical. It’s happened with non-traded REITs (real estate funds) in past downturns.

So why is this happening now? Because private equity firms are sitting on over $1.1 trillion in “dry powder” committed money they haven’t deployed.

But exits are frozen. The IPO and M&A markets (where PE firms usually sell investments) are ice-cold.

They need fresh money. Badly.

401(k)s represent a massive pool over $13 trillion in retirement assets. Even a small slice diverted into private equity would inject billions into struggling portfolios.

That’s why industry lobbyists have been pushing for this for years.

The EO is their win.

The result?

A quiet shift of risk from institutions who’ve started pulling back from some private markets to individual retirement savers who may not understand what they’re signing up for.

All under the guise of “choice.”

And let’s be clear: this isn’t a level playing field.

Large pensions and endowments negotiate better terms lower fees, advisory access, sometimes co-investment rights.

Retail 401(k) savers? You’re getting a packaged, high-fee version, with little say and even less visibility.

Younger, lower-income workers may be hit hardest.

They’re more likely to be auto-enrolled in default funds. They have less financial knowledge. And they can’t easily afford illiquid, expensive investments.

Yet under this EO, they could be exposed without even realizing it.

And older workers?

They rely on their 401(k) balance in the near term. Illiquid assets could mean delayed access or being forced to sell other holdings at bad prices while waiting for private funds to pay out.

Time is a luxury they don’t have.

Now imagine the worst-case scenario:

• A market crash hits
• Private equity valuations plummet (but aren’t reported yet)
• 401(k) participants try to withdraw
• Funds gate redemptions
• Savers discover losses years later
• Lawsuits follow—but fiduciaries claim they followed guidance

Who’s left holding the bag? You.

There’s even systemic risk. If private equity gets hooked on 401(k) inflows, what happens when those flows stop?

As Deloitte warns, retail exposure to private capital could explode from ~$80 billion today to trillions by 2030.

Too much money chasing too few deals = trouble.

In short: This executive order won’t immediately force changes but it clears a path.

If fiduciaries follow DOL/SEC guidance, and providers feel competitive pressure, private equity could quietly become part of your retirement even if you never asked for it.

This isn’t about fear. It’s about clarity. Private equity can offer value but it’s not a silver bullet and it’s not designed for daily savers.

If the risks aren’t clearly communicated and the rules aren’t enforced you’re not investing like the 1%.

You’re absorbing their fallout.

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Just a heads-up, guys! Trump hasn’t signed the order yet, so details could possibly change. But the goal here is to highlight the potential risks tied to opening 401(k)s to private equity.