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The private equity industry is preparing to lobby the incoming Trump administration to give it access to broad pools of capital it has not historically been allowed to tap, including retirement savings, in a move that could unlock trillions for their firms.
The $13tn industry is hoping the new White House will revive a deregulatory push from the final months of Donald Trump’s first presidency, which allowed private equity investments to be included in professionally managed funds.
Now, the industry is seeking to push past that first step, allowing tax-deferred defined contribution plans such as 401ks to back unlisted investments such as leveraged buyouts, low-rated private loans and illiquid property deals, industry executives told the Financial Times.
The executives said that the effort could give their higher-fee funds a chance to tap a class of investors with at least as much in assets as the sovereign wealth funds, pensions and endowments that have traditionally backed the world’s largest groups such as Blackstone, Apollo Global and KKR.
Private equity and non-traded real estate funds have generally been confined to institutional investors or wealthy individuals because they often carry higher leverage, less liquidity and fewer disclosures than traditional mutual funds and exchange traded funds. They also generally carry higher fees and have performance metrics that can be harder to evaluate.
“We’ll look for opportunities to allow the average investor, if they want to, to diversify their portfolio and have the same access that wealthy individuals do to a private fund,” said one Washington lobbyist. “There are 4,000 publicly traded [US] companies. Most people are invested in the marketplace through those companies, but there are 25mn private companies out there.”
Industry executives told the Financial Times the deregulatory push was akin to “doubling demand” for the private capital industry’s various funds.
Marc Rowan, chief executive of Apollo, has called the trillions in assets held by US 401k plans an opportunity for his industry. He has raised concerns about concentration in index funds owned by retirement savers and questioned whether such investors must be confined to funds offering daily liquidity.
“I jokingly say sometimes, we levered the entire retirement of America to Nvidia’s performance. It just doesn’t seem smart. We’re going to fix this and we are in the process of fixing it,” Rowan said at an Apollo event this autumn. “In the US, we have between $12tn and $13tn in 401k plans. What are they invested in? They are invested in daily liquid index funds, mostly the S&P 500, for 50 years. Why? We don’t know.”
Wealthy individuals have flocked to private real estate and lending funds managed by Blackstone, Apollo, HPS and Owl Rock among others in search of higher yields and diversification into companies not available to public market investors. A record $120bn flowed into such funds in 2024, according to private funds data specialist Robert A Stanger & Co.
However, some private equity industry executives worry retirement savers will not have the ability to discern between credible funds and fly-by-night entrants chasing lucrative fees. They recommend private investments should be directed by fiduciaries, rather than individuals selecting funds directly themselves.
The deregulatory window was opened by Eugene Scalia, son of the late Supreme Court Justice Antonin Scalia, during the late stages of the first Trump administration. Then acting as head of the labour department, Scalia’s agency issued an Information Letter in June 2020 that allowed private equity investments to be a part of retirement-oriented holdings such as target date funds and balanced funds.
“Adding private equity investments to such professionally managed investment funds would increase the range of investment opportunities available to 401(k)-type plan options,” the department said at the time.
The idea was supported by Jay Clayton, then chair of the Securities and Exchange Commission, who joined the board of Apollo after leaving office.
Lobbyists and private capital groups are now researching how they can advance Scalia’s efforts into mass self-directed investments. Scalia, who joined law firm Gibson Dunn after Trump’s first presidency, successfully challenged the Biden administration’s efforts to increase disclosures and regulations for private market funds.
“We’ll make the case for a pro-growth regulatory regime that supports small businesses and provides more opportunity to everyday investors,” said Drew Maloney, head of the American Investment Council, the private capital industry’s main lobbying group in Washington.
PE executives believe the incoming administration will be less adversarial to private dealmaking, which was a central target of President Joe Biden’s antitrust authorities.
“We’ll hit the ground running to work with the Trump administration,” Maloney said.