Private Markets Edge Toward 401(k)s, but Widespread Adoption Faces Structural Hurdles

Recent policy developments – including an executive order issued just last month by President Donald Trump – have prompted the U.S. Department of Labor and Securities and Exchange Commission to signal greater openness to incorporating alternative investments in defined contribution retirement plans.

But despite this momentum, the path to meaningful implementation remains narrow, according to panelists on a webinar hosted yesterday by the Alternative & Direct Investment Securities Association, known more commonly as ADISA.

The recording for Private Markets in the 401(k): Navigating the New Rules is available here.

The session was led by John Grady, executive director of ADISA and a noted securities attorney. He was joined by Michael Underhill, chief executive officer of Capital Innovations and the sub-adviser to the Cantor Fitzgerald Infrastructure Fund; and David Kaleda, a partner at the law firm Eversheds Sutherland. Kaleda is also an expert on the Employee Retirement Income Security Act of 1974, i.e., ERISA.

Together, they explored the opportunities and challenges of integrating private market exposure – such as private equity, private credit, and real estate – into defined contribution plans.

Policy Winds Favor Inclusion – but With Caveats

Panelists agreed that the executive order, Democratizing Access to Alternative Investments for America’s Workers, along with subsequent DOL and SEC activity, represents a meaningful policy shift, but they emphasized that – due in part to operational and fiduciary hurdles – regulatory openness does not equate to immediate readiness.

Grady, acting as moderator, framed the discussion by underscoring that while policymakers may be opening the door to alternatives, fiduciary and operational hurdles will ultimately determine how, and whether, these assets can be integrated into defined contribution plans like 401(k)s.

Interval Funds and Other Structures Lead the Way

When it comes to practical adoption, the discussion focused on several structures that could serve as “on-ramps” for alternative investments in 401(k)s. Chief among them: interval funds.

Underhill pointed to interval funds as a practical on-ramp, highlighting their periodic liquidity, net asset value reporting, and SEC oversight as features that can align with defined contribution plan requirements.

“When you just look at the transparency, daily pricing, periodic liquidity, that’s where you’re going to see interval funds … being on the starting block, having a lead position, pole position, if you will, in this race,” Underhill said.

Other structures mentioned as early candidates include: collective investment trusts tailored to include alternative sleeves; custom target-date funds with private market allocations; and fund-of-funds that package illiquid assets into a compliant, auditable format.

Yet challenges persist. Recordkeeping platforms have only limited capacity to accommodate non-daily-liquid assets, and fiduciary concerns remain high – particularly around fees, valuations, and participant disclosures.

Fiduciary Risk, Education, and Oversight

Kaleda stressed that the executive order does not alter ERISA obligations. He said plan fiduciaries must demonstrate rigorous due diligence on fees and valuations, provide clear disclosures, and ensure participants understand the risks of illiquid assets.

“I think this executive order is particularly helpful to plan sponsors, particularly ERISA-covered plan sponsors, who want to include these types of investments in their plans. There’s nothing in ERISA that’s ever said that you can’t have these kinds of investments in plans,” Kaleda said.

He added that it sends a strong signal to the retirement plan marketplace that they’re at least going to get backing from key regulators, particularly DOL, but possibly the SEC.

Education was flagged as equally critical. Unlike mutual funds or ETFs, private assets introduce unfamiliar concepts such as lockups, valuation lags, and illiquidity – all of which must be communicated clearly to participants to avoid litigation or regulatory scrutiny.

What’s Next?

While the panel’s tone was cautiously optimistic, the consensus was clear: adoption will be slow and initially concentrated among large, institutionally resourced plans. Smaller plans lack the infrastructure to support these vehicles in the near term.

Still, asset managers are responding to the regulatory signals. Several have begun structuring alternative offerings – including interval funds – with retirement plan compatibility in mind, anticipating a future where private markets are a standard, rather than exotic, component of retirement portfolios.

Watch the recording.

The Alternative & Direct Investment Securities Association bills itself as the nation’s largest trade association representing the non‐traded alternative investment space. ADISA’s members are typically involved in non-traded real estate investment trusts, business development companies, master limited partnerships and private and public funds, 1031 exchange programs, energy and oil and gas interests, equipment leasing programs, or other alternative and direct investment offerings.

ADISA was founded in 2003 and has approximately 5,000 members, representing more than 220,000 professionals throughout the nation – including sponsor members who have raised in excess of $200 billion in equity and serve more than 1 million investors.

For more ADISA news, please visit their directory page.