The vibrant U.S. capital markets are the envy of the world. U.S. stock exchanges alone hit $69 trillion in early 2026. But stocks are not the only game in town. In addition to public companies, alternative investments like private equity and venture capital are also booming as capital markets bring together investors and entrepreneurs in the most efficient manner: U.S. private funds are managing over $28 trillion in assets, and, for example, North American start-up funding soared 46 percent in 2025, which was largely driven by the AI boom.
Despite their tremendous success, capital markets remain fragmented in nature and current regulations are failing to adapt for the benefit of everyday Americans’ retirement savings. For example, although private equity markets are booming, investment in these assets is undertaken by a limited group of investors, primarily institutional players and high-net-worth individuals, due to high investment minimums and regulatory requirements. The changing structure of the markets and the increasing prevalence of alternative investments signal the need for an improved regulatory environment to democratize these investments and expand their footprint to include small and large investors alike.
That was the theme of President Trump’s August 2025 Executive Order “Democratizing Access to Alternative Assets for 401K Investors.” The President’s focus on workplace retirement assets as a starting point was a smart move, as these savings vehicles represent the average American’s first encounter with investment options beyond interest-bearing accounts. We see that in data as well: In the late 1980’s, less than a third of U.S. households held stock. According to this year’s most recent data, approximately 62% of U.S. adults report owning stock, either directly or through retirement accounts like 401(k)s or IRAs. Past research shows that this growth in stock-owning households has occurred across all income quintiles. In fact, the most rapid growth has taken place among lower-income Americans: today nearly four in 10 stock-owning households have annual incomes of less than $50,000.
As the U.S. strives to increase its savings rate, American households deserve every tool to maximize those savings – including private equity. Multiple research projects show that compared to other market instruments, U.S. private equity generated the highest returns of any asset class over time horizons of 5-, 10-, 15-, and 20-years. Based on past experience, retirement savings vehicles are the right places to start due to their reach within the investment landscape.
Under the leadership of Acting Secretary Keith Sonderling, the Department of Labor is hard at work on improving the regulatory landscape within retirement accounts to expand the available investment options. For example, adopted in 1977, a regulation called the Prohibited Transaction Exemption (PTE-77-4) established a practical framework allowing investment managers to offer certain affiliated funds to retirement plans without violating ERISA's prohibited transaction rules, which forbid fiduciaries from engaging in self-dealing or transactions between a plan and "parties in interest". Its protections were – and remain – robust: no double fees, clear disclosures to plan fiduciaries, and independent fiduciary oversight. However, these regulations have not been updated to reflect today’s changing investment landscape and the variety of assets available that would benefit everyday investors. Without modernizing PTE 77-4, certain investment vehicles may remain off-limits to retirement plans even when they meet high standards of professional management, cost-effectiveness, and regulatory oversight due to the structural barriers unchanged since the Carter administration. Acting Secretary Sonderling has rightly identified this gap and signaled the Department's intent to address it, which is a welcome step toward bringing retirement regulation in line with today's markets.
Amending PTE 77-4 to encompass these alternative investment vehicles would not represent a departure from the exemption's original purpose. On the contrary, it would be entirely consistent with the intent behind PTE 77-4 – ensuring that America’s nearly 100 million retirement savers can access professionally managed, appropriately safeguarded investment options that can capture the current growth happening in AI and data centers for their portfolio’s long-term benefit. An update would simply bring that intent into the modern era, reflecting today's investment landscape while preserving the protections that have made the exemption effective for decades.
Opening a fully investible universe by removing the structural barriers that prevent retirement plans from accessing professionally managed strategies solely because of their organizational structure – not because of their quality, cost, or risk profile – should be the goal. Of course, preserving robust protections by maintaining fiduciary standards of care, the prohibition on double fees, disclosure requirements, and independent oversight should go hand-in-hand with expanding access. That way, we can align regulations with reality by enabling fiduciaries to evaluate investments based on what matters most – risk, cost, governance, and portfolio fit – rather than legal structure alone.
Today's investment landscape is far broader and more dynamic than when many of ERISA's implementing regulations were written. Retirement savers should not be limited to a fraction of the market simply because the rules were built around the products of a prior era. Broader access to diversified investment strategies is a proven tool for improving long-term outcomes – and all investors, not just institutional or wealthy investors, should benefit. Modernizing PTE 77-4 is the right step at the right time, and the Department of Labor has the opportunity to deliver it for the benefit of savers and investors throughout the economy.
