President Donald Trump on August 7 signed an executive order to potentially ease regulatory barriers that have limited defined contribution (DC) retirement plans’ access to alternative investments1 —a move that could allow millions of retirement savers to invest in an expansive list of such assets. The order aims to have a democratizing effect, as access to alternatives is already a common and growing feature in the retirement accounts of defined benefit (DB) plan savers (typically government employees and legacy corporate pension beneficiaries). This democratization seems profoundly fair, given that alternative investments have historically outperformed comparable public market options, on average. However, as always, not everyone will experience “average” outperformance, and alternative investments also carry higher fees and relative illiquidity, which may dampen rather than brighten some investors’ retirement dreams.
In this report, we consider…