A New Path Emerging: Alternatives in 401(k) Portfolios
By Joseph DaGrosa Jr., Chairman and Chief Executive Officer, Axxes Capital
In August 2025, the Biden-era regulatory consensus on private investments in retirement accounts shifted dramatically. President Trump’s executive order, Democratizing Access to Alternative Assets for 401(k) Investors, directs the U.S. Department of Labor and the U.S. Securities and Exchange Commission to revisit guidance that had discouraged retirement plans from offering alternatives. Within days, the DOL rescinded its 2021 supplemental statement cautioning against alternative assets in 401(k) plans.
What does this imply for advisers, and how can firms help advisers seize this opportunity? The message is clear: although this executive order does not change ERISA itself, it signals a shift in regulatory posture. The pathway is opening to bring private equity, private credit, infrastructure, and real estate into defined contribution, or DC, plans and advisers who lead that integration thoughtfully may generate competitive advantage and better client outcomes.
Why Now? The Case for Private Investments in Defined Contribution Plans
Historically, private investments have been the domain of institutional investors or high-net-worth portfolios. But the delta between private and public markets has grown compelling. Over the period from January 2008 to June 2024, a hypothetical portfolio splitting 50% private equity, 25% private credit, and 25% real assets would have delivered higher returns and lower volatility than a traditional 60/40 blend of equities and bonds. Even a more modest 20% allocation to private strategies benefited risk-adjusted results. Lower correlations to public markets may also help cushion downturns.
Given that nearly 87% of U.S. companies with over $100 million in revenue remain privately held, alternatives may provide exposure to growth opportunities not available in public indices. The potential upside is clear – but execution and structure matter.
The Structural Challenge: Transparency, Liquidity, and Fiduciary Compatibility
Integrating private markets into 401(k) plans is not simply a matter of “opening the door.” Retirement plans demand transparency, operational robustness, and fiduciary defensibility. Many private vehicles – traditional private equity, closed-end funds, co-investments – carry liquidity constraints, gating mechanisms, and complexity that may make them impractical for DC plans.
That’s where interval funds emerge as a practical bridge. Interval funds combine several desirable features: periodic liquidity (e.g., quarterly redemptions), formal net asset value disclosure, and an operational profile more compatible with plan administration. They allow fiduciaries to offer exposure to private strategies while maintaining transparency, consistent valuation, and clearer liquidity policies. In short, interval funds may serve as a defensible, ERISA-aligned pathway to bring private equity, credit, and real estate to a broader pool of investors without overwhelming operational burdens.
Of course, no vehicle is perfect. Liquidity constraints remain – investors must understand that redemptions may be limited, and requests may be processed at scheduled intervals. The plan’s design must clearly communicate those constraints and align with participant goals and time horizons. And fiduciaries must continue to abide by ERISA’s core duties – loyalty, prudence, and full disclosure – even amid new regulatory flexibility.
The Biggest Differentiator: Manager Selection and Operational Rigor
One of the most significant risks in democratizing access to private markets is manager quality dispersion. As more capital chases alternatives, lower-quality or opportunistic managers may proliferate. The spread between top- and bottom-quartile performance in private markets is wide.
For advisers, the challenge, and opportunity, is to partner with experienced private markets managers who have demonstrated track records, scalable infrastructure, transparent valuation processes, strong alignment of interest, and robust compliance and reporting standards. Advisers will also need to scrutinize manager readiness: Can they support retail and DC infrastructure? Do they have systems for ongoing liquidity, participant reporting, and compliance? Are fees structured in a way that aligns manager interests with long-term outcomes?
At Axxes Capital, we view our role as a partner to advisers. We vet and curate manager relationships, conduct due diligence, and structure fund or interval vehicles to be adviser-friendly. In doing so, we help advisers lower the barrier to entry and reduce operational friction when adopting private allocations in DC plans.
From Signaling to Execution: How Advisers Can Move Forward Today
Even though the DOL has up to 180 days to issue formal guidance and potential safe harbors (by early 2026), advisers cannot wait until then to begin preparing. Firms that move early will be better positioned to educate clients, align plan platforms, and build internal capabilities. Consider these steps:
- Audit your client base and platform readiness. Investigate whether your clients’ retirement platforms support private investments or interval-style vehicles. Understand whether custodians, recordkeepers, and plan administrators can accommodate semi-liquid alternatives.
- Educate stakeholders. Begin holding educational sessions for plan sponsors, participants, and retirement committees. Explain the benefits, tradeoffs, liquidity constraints, and the role of private investments in the broader portfolio.
- Design prudent allocation strategies. Develop thoughtful allocation frameworks tailored to participant goals, time horizons, and risk tolerance. For many, a moderate less-than-20% allocation may strike the balance between return enhancement and liquidity risk.
- Engage with curated managers and vehicles. Partner with firms that already have relationships with established private markets managers, access to interval fund vehicles, and experience structuring these strategies for retail and DC use.
- Monitor, report, and review. Because interval structures and private vehicles carry complexities, ongoing monitoring, rigorous reporting, and reassessment of manager performance and liquidity terms are essential.
Advisers Who Lead Will Shape the Future of Retirement Investing
When alternatives enter the DC space in a meaningful way, the competitive dynamics may shift. Advisers who can credibly guide clients into private markets allocations – while managing liquidity expectations, fiduciary obligations, and operational complexity – may differentiate themselves significantly. Advisers that move early and thoughtfully could enjoy first-mover advantages in institutionalizing alternative exposure for a broader base of investors.
At Axxes Capital, we believe the executive order marks a turning point. But execution – not regulatory rhetoric – will determine who benefits. Our mission is to empower advisers with the tools, manager access, structural solutions, and thought leadership they need to integrate private markets into DC portfolios responsibly. By becoming early architects of private credit, equity, infrastructure, and real estate allocation strategies in retirement plans, advisers can help clients access the new frontier of returns while preserving fiduciary strength and operational integrity.
Joseph DaGrosa Jr. is the chairman and CEO of Axxes Capital. DaGrosa has over 30 years of experience successfully investing in multiple industries, including insurance (where he served as chief investment officer), retail, food and beverage, real estate, hospitality, healthcare, aviation, sports and entertainment. DaGrosa also serves as chairman of the private equity firm, DaGrosa Capital Partners LLC, a Miami-based private equity firm that is focused on making influential minority investments in companies located throughout the United States, Western Europe, and Latin America.
Axxes Capital is a private markets investment management firm committed to delivering innovative, institutionally backed investment solutions to wealth advisers and their clients. The firm partners with independent asset managers to offer access to private equity, credit, structured finance, and alternative strategies, all through adviser-friendly vehicles.
The views and opinions expressed in the preceding article are those of the author and do not necessarily reflect the views of AltsWire.
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