WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy for Better Markets, issued the following statement after President Trump signed an executive order promoting the inclusion of private market investments in 401(k)s:   

“This executive order exemplifies the administration’s determination to prioritize the interests of Wall Street over the interests of Main Street and retail investors. Let’s be clear: neither 401(k) plan sponsors or 401(k) plan participants—regular, hardworking Americans—are asking to replace stocks and bonds in their 401(k)s with risky private assets. Instead, the private funds industry needs a way to get its hands on the $12 trillion in Americans’ retirement accounts to boost its profits and make up for the fact that institutional investors are fleeing the private markets due to mediocre returns, higher fees, and more risk. 

“There are good reasons why 401(k) plans have been considered closed to private markets, and those reasons—a lack of transparency, illiquidity, and high fees—have not changed: 

• Private market assets are not subject to the same disclosure requirements as stocks and bonds. Public companies need to tell investors what is going on at those companies. Private companies don’t. Even institutional investors struggle to get the information they need to properly value private market assets. So 401(k) savers would have opaque and risky investments in their retirement accounts. 

• Private market assets can’t be easily sold. There is no equivalent to the stock market where investors can buy and sell private market assets easily and cheaply. This means private market assets are both harder to value and harder to liquidate.  

• Fees are perhaps the biggest reason for 401(k) plans to avoid private market assets. The fees charged by private funds are much higher than the fees to mutual funds. Numerous studies show that, once fees are taken into account, private market investments underperform their publicly traded counterparts. 

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.