The Trump administration is offering private credit a way out of its problems.
Opening up 401(k) accounts to alternative assets, a move the Labor Department advanced with new employer rules on Monday, would help solve the crisis now facing investment firms whose retail shareholders are running for the exits.
Alternative assets are “not a carrot that you pull out of the ground every day to see how it grows,” KKR’s Alisa Wood told Semafor. The problem is that funds marketed to retail investors allow just that, offering them the chance to take out a sliver of their money on a quarterly or monthly basis. It’s almost designed to malfunction when nerves are high. “The least satisfying, but most accurate, thing to be said about private credit right now is that it’s working exactly as it’s supposed to,” we wrote last week.
Retirement accounts are harder to cash out of, because doing so brings steep taxes. That would give individual investors exposure to alternative assets and would protect them from their instincts to panic at the worst moments. Historically less than 2% of Americans tapped their 401(k) for emergency cash every year. That number has risen, but those redemptions could be more easily met by selling stocks and bonds that are expected to remain the bulk of 401(k) assets.
