I love Bitcoin. I love private equity. They’re two of my favorite investments, personally. But when it comes to 401(k) plan participants? I hate them. Not because the asset classes themselves are bad, they’re not. But because plan participants, by and large, make classic investing mistakes that alternative assets can make even worse.
Let me explain.
When you give everyday plan participants access to high-risk, low-liquidity investments, you’re handing a loaded gun to someone who thinks the safety’s on because the brochure said “diversification.” Most participants already struggle with things like chasing returns, buying high after something’s made headlines, and bailing out after a dip, locking in losses. They don’t understand time horizons, liquidity constraints, or what a capital call even is. And now we’re going to toss them the keys to private equity and Bitcoin in their retirement accounts?
The new Trump executive order that “broadens access to alternative assets in 401(k) plans” might look like a win for diversification and freedom of choice. And for a sophisticated investor with a financial advisor and a long investment horizon, it might be. But let’s not kid ourselves: most participants aren’t calling the shots with long-term strategy in mind. They’re reacting. They’re panicking. They’re following headlines, not fundamentals.
This isn’t about being a gatekeeper. It’s about being a fiduciary.
As a fiduciary, I have to ask: is this in the best interest of the participants, or is it a win for asset managers who see a new pool of capital to dip into? Because if it’s the latter, and it feels like the latter, then shame on us. Plan sponsors shouldn’t chase the flavor of the month or cave to pressure from providers who see dollar signs instead of people.
Alternative investments have their place. But for most participants, that place is outside their 401(k). Let’s not confuse optionality with responsibility.
