The Trump Administration has taken steps to expand access to private investments for American retirement portfolios. This week, the Department of Labor rescinded guidance that limited everyday Americans' ability to include private investments in their retirement plans. AIC President and CEO Will Dunham supported this move, stating: "By pulling down burdensome guidance and laying out a rigorous report underpinning next steps, the Trump administration is swiftly demonstrating its commitment to strengthening retirement for all Americans."
In conjunction with this action, the White House's Council of Economic Advisers released a report titled "Retail Access to Alternative Investments Via Defined Contribution Plans." The report outlines the advantages of private investments currently available to public pension plans and argues these should be extended to all Americans through their retirement plans.
The report includes several key points: "Across all age cohorts, we find that an allocation to private equity enhances portfolio risk-adjusted return and increases retirement wealth for defined contribution plan participants." It also notes a shift from public markets towards private markets globally, which is more pronounced in the U.S. The document highlights that "private companies have a much higher growth potential relative to public companies," with private firms comprising an increasing share of total firms over time.
Furthermore, the report indicates that "recent academic literature finds that private equity (PE) buyout funds have consistently outperformed the S&P 500 net of fees," estimating an outperformance of 20 to 27 percent over a fund’s life. It concludes that younger defined contribution plan participants would benefit most from diversifying into private equity on a risk-adjusted basis.
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