Private equity groups (PEGs) are having a moment. First, President Donald Trump's "Big Beautiful Bill" (now law) included a provision allowing them (through the companies they buy) to deduct more of the interest they pay. And now, it appears that PE giants, whose executives are among the president's biggest supporters, are inching closer to a goal they've long worked toward: getting a piece of the $12 trillion 401(k) retirement market.
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A PEG is a firm that invests in private companies or purchases public companies and employs strategies to make them more profitable. The new companies are leveraged by debt, which helps explain why PEGs are so excited to receive the new, larger interest deduction gifted to them in Trump's megabill. Once they've restructured a company (usually within three to five years), the PEG sells the asset at a profit.
PEGs are lobbying President Trump to issue an executive order allowing retirement plans to add private equity investments to their menu of investment options. Entrance into the 401(k) market provides access to the money that PEGs need to buy up more companies, make changes, and sell those companies for a profit.
The ability to invest a portion of your retirement funds in a PEG may sound like a sure bet. However, a recent study from the Johns Hopkins Carey Business School suggests that investing in a PEG may carry the promise of high returns, but it's also fraught with risk and may not align with the predictability and financial security you seek. The study advises American workers and their financial advisors to carefully evaluate the risks and complexities involved before diving in.
You should review your 401(k) plan and portfolio at least once a year. A review will not only inform you of any new offerings (like PEGs), but it also allows you to assess the health of your account, identify any weaknesses, and make changes as needed.
If you've never conducted a review before (or aren't sure you've been doing it right), here's what a thorough review should include:
Whether or not the president signs an executive order allowing PEGs to get into the 401(k) market, it's ultimately up to you to know where your investments stand and to decide if investing in a PEG is right for you.
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