Private equity firms are hoping that the brand new Trump administration makes it easier for them access to something they’ve long wanted: your 401(k).
Wall Street investment giants view Essential Street retirement savings as a solution to boost demand for non-listed illiquid bets that aren’t traded on any public exchange.
Such investments include real estate funds, private credit, and leveraged buyouts of firms.
Typically, private equity firms comparable to Apollo (APO), Blackstone (BX), and KKR (KKR) pool money from high-net-worth individuals and institutional investors comparable to endowments and public pensions to make these bets. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
What they’ve long desired to tap is greater than $12 trillion currently housed in defined-contribution plans that employees depend on for his or her retirement nest eggs, comparable to 401(k)s.
At close: January 8 at 4:00:02 PM EST
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The Biden administration has not warmed to that concept, but industry watchers expect that to vary under Donald Trump’s second term. He is anticipated to broadly loosen regulations that affect the world of monetary services.
“We’ll make the case for a pro-growth regulatory regime that supports small businesses and provides more opportunity to on a regular basis investors,” said Drew Maloney, president and CEO of personal equity lobbying group American Investment Council.
The argument for such a change is that personal equity funds could give on a regular basis investors more diversification away from public markets and a shot at greater returns — in exchange for some illiquidity.
Read more: How much should I contribute to my 401(k)?
The reasoning aligns with broader concerns many investors have over the historically high valuation of the present stock market and the concentration of Big Tech stocks. Of the highest 10 firms within the S&P 500 index (^GSPC), all but Berkshire Hathaway (BRK-A, BRK-B) are tech giants. Together those 10 account for 37% of the index.
Marc Rowan, CEO of Apollo, has argued that too many investors are counting on the performance of too few public firms.
“Should we get access to 401(k) through broad-based reform or regulatory change or regulatory encouragement, I think that might be upside not only for us but for the complete industry,” Rowan told analysts in November.
Today, each private and public assets carry risks and rewards, Rowan told Yahoo Finance later that very same month, with more firms opting to go private than public.
“The largest trend in our industry is investors, individual investors, and institutional investors their fixed income bucket and saying to themselves, why is that this 100% public?”