This article about the Executive Order on Alternative Assets was written by ChatGPT. I thought it would be interesting to see what it, with its infinite database, had to say about the EO. Needless to say, this should not be seen as representing my views or those of  my law firm.

My prompt to ChatGPT was: Please summarize the EO, explain its significance, predict what will happen, discuss the possible problems and benefits.

On August 7, 2025, President Trump issued an Executive Order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” This directive signals a sweeping policy shift aimed at expanding retirement investment choices.

What’s in the EO — At a Glance

Definition of Alternative Assets

The EO broadens the investment universe beyond stocks, bonds, and mutual funds to include:

• Private investments like private equity and private credit
• Real estate and real-estate-backed debt
• Commodities
• Infrastructure financing projects
• Digital assets (e.g., cryptocurrencies via actively managed vehicles)
• Lifetime income tools, such as longevity risk–sharing pools (akin to annuities or tontines)

Agency Directives within 180 Days

The EO orders the Department of Labor (DOL) to:

1. Reexamine past and present ERISA guidance, including possibly rescinding the 2021 Supplemental Private Equity Statement that discouraged plan fiduciaries from including alternative assets. (Indeed, on August 12, the DOL rescinded that very statement.)
2. Clarify fiduciary responsibilities—help plan managers weigh higher fees and complexity against diversification and net returns; propose rules, guidance, or “appropriately calibrated safe harbors” to reduce litigation risk.
3. Coordinate with Treasury, SEC, and other regulators to align regulatory shifts—g., revisiting accredited/qualified investor standards to ease retail access.

Simultaneously, the SEC is tasked with exploring updates to rules that currently limit plan participants’ access to alternative investments.

Why It Matters

For Mutual Funds-Savvy Investors

• Greater diversification: Alternative assets could mitigate traditional correlation with equities and bonds.
• Potential for higher returns: Private markets and digital assets may offer outsized growth—but at cost and risk.
• Bridging the gap: While defined benefit plans (e.g., pensions) and sovereign funds have long used alternatives, DC (defined contribution) plans have lagged due to regulatory and legal caution.
• Modernizing retirement investing: This EO seeks to give everyday savers the same tools affluent investors already use.

What to Expect: Likely Outcomes

1. New product development: Major players like BlackRock, Blue Owl Capital, Empower, and others are already preparing to launch 401(k)-friendly products incorporating private assets.
2. Regulatory updates: Expect new DOL and SEC guidance or rulemaking—though through public notice and comment, which could delay finalized policy beyond the 180‑day window.
3. Litigation landscape: While safe harbors may emerge to reduce fiduciary lawsuits, ERISA rights remain intact—participant litigation won’t vanish.
4. Industry caution: Large plan sponsors and providers will move slowly, carefully evaluating due diligence, pricing, liquidity, and transparency—guarding against pitfalls before offering alternatives en masse.

Risks and Pitfalls

• Illiquidity & complexity: Many alternative assets have long lock-up periods, opaque pricing, and complex fee structures—not ideal for liquidity needs or simple plan administration.
• Volatility: Particularly in digital assets like crypto, price swings can erode retirement portfolios and undermine risk management.
• High fees: Private equity and hedge-like vehicles often charge steep benchmark returns plus expenses, which may not pay off net of costs
• Fiduciary liability: Even with guidance, fiduciaries could face legal scrutiny if alternative additions underperform or are poorly explained.
• Informed investing gap: Many participants lack deep understanding of non-traditional funds—raising the importance of education and default pathways.

Benefits and Opportunities

• Diversification and growth: Alternative assets, if well-selected, can smooth returns across market cycles.
• Innovative retirement tools: Longevity pools or annuities backed by non-public assets may offer more efficient, reliable retirement income.
• Leveling the playing field: Everyday savers gain access to investment strategies once reserved for the elite.
• Encourages financial industry innovation: The EO opens doors for novel fund structures (like ’40 Act closed-end funds with private market exposure), enhancing transparency and suitability for DC plans.

Final Thoughts: The 401(k) Landscape—Evolving, Cautiously

While this EO doesn’t immediately change the law, it sets in motion a regulatory and industry shift that may reshape how retirement portfolios are built. For mutual fund-literate readers, think of it as a potential expansion of the toolbox—from familiar public-market investing to a broader, more complex suite of assets.

That said, prudence is paramount. Until guidance is finalized, and products vetted for transparency, liquidity, cost, and fiduciary safety, plan sponsors and participants should proceed cautiously. Retirement security remains the goal—any new additions must be justified by net benefit, not novelty alone.