Private credit is set for a boost in the US, after President Donald Trump signed an executive order to allow the asset class – and other alternative assets – in 401(k) retirement accounts.
The move should benefit alternative asset managers by opening up the $12tn (£8.9tn) market to their investments.
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“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.
Managers are already making moves to tap into the lucrative new market.
BlackRock plans to launch its own retirement fund that includes private equity and private credit investments next year.
Industry onlookers have argued that savers should be able to benefit from higher returns on private markets investments to boost their retirement pots.
However, others have warned that a lack of transparency and lower liquidity in these asset classes could pose issues.
“Private markets are no longer the obscure, high-risk investments they once were,” said Simon Tang, head of US at alternative investment software firm Accelex.
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“They’ve matured into a strong-performing asset class delivering excellent long-term returns, so this is good news for Americans. It’s also good news for fund managers, opening up fresh capital flows at a time when the industry could use a boost.”
However, Tang highlighted that retail investors may struggle with the lack of available, standardised data in private markets, compared to public stock market investments that offer instant pricing, clean data and daily performance updates.
“Retail investors are the next big growth area for private markets,” he added. “But fund managers and the asset managers distributing private funds to 401(k) investors must take strong measures to improve clarity over private assets’ valuations and performance. They will need to adopt technology like AI to drive investment transparency at scale. Without it, retirement investors will be flying blindfolded and exposed to risks that may threaten their golden years.”
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