President Trump has made the move to firmly hit private equity's (PE) G-Spot: unfettered access to the $12 trillion 401(k) market. This past Thursday, Trump signed an executive order Democratizing Access to Alternative Assets for 401(K) Investors

The order directs the Secretary of Labor Lori Chavez-DeRemer to review and potentially remove the biggest obstacle PE has had in gaining access to 401(k) plans, most notably the plan manager being sued for not performing their fiduciary responsibilities by investing in PE. That's what happened in 2015 when Intel employees sued the company for what they considered to be lousy returns from PE investments.

From the order:

Within 180 days of the date of this order, the Secretary of Labor (Secretary) shall reexamine the Department of Labor's past and present guidance regarding a fiduciary's duties under the Employee Retirement Income Security Act of 1974…

Burdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fiduciaries, and stifling Department of Labor guidance issued since my first term, however, have denied millions of Americans opportunities to benefit from investment in alternative assets.

I think it is very safe to assume that Chavez-DeRemer will do what needs to be done to give plan managers and sponsors legal cover.

This is a tremendous win for PE, perhaps its biggest ever. PE will get access to a gigantic pool of retail capital and gain a huge amount of leverage on existing investors with regard to how fees are charged and structured.

I wrote in May about the possibility of this executive order. My concerns were:

Retail investors could be given the worst deals, especially now as PE managers are stuck with bulging portfolios of companies that need to be sold so they can pay back many of their existing investors

Valuation for PE portfolio companies is murky

Liquidity for PE deals is low

PE management and performance fees are generally much higher than other traditional investment choices

Bloomberg News had an informative and hilarious article after Trump signed the order.