The Great 401(k) Shift: Why Alternatives Are Heating Up

TL;DR: The Labor Department has proposed a rule that would make it easier to put private markets in 401(k)s, and Yahoo Finance interviewed Manulife John Hancock's David Cohen about why. His case rests on longevity risk. The rule is still a proposal, so nothing on your plan menu changes yet.

I signed off on more than 1,000 QA jobs in the Navy, and the habit stuck: verify before you trust. That habit is useful here, because a lot of people are about to explain why private funds belong on Wall Street's menu, and many of them get paid when you agree.

Yahoo Finance published the conversation with Cohen of Manulife John Hancock Investment Management. The interviewer asked whether plan sponsors are showing more interest in alternatives. Cohen started with the problem he thinks private markets solve.

According to Yahoo Finance's transcript, Cohen said "people now have to live off of all their hard work earnings for 10, 20, 30, 40 or longer years." He added that his firm believes private market alternatives "can be one of the important tools" for that.

That's a reasonable argument. It also comes from an executive at an asset manager, so weigh it the way you'd weigh a sponsor's pitch deck.

Why is this happening now?

The push comes from Washington. Executive Order 14330, signed August 7, 2025, says that more than 90 million Americans participate in employer-sponsored defined-contribution plans, and that the vast majority have no opportunity to hold alternative assets through them.

The Labor Department followed with a proposed rule. It has not been finalized, so everything below describes a proposal.

What would the rule actually change?

It would protect the people who build your plan menu. Morningstar explains that fiduciaries who document a due diligence process covering fees and liquidity would get a "safe harbor" that dampens the chance of participant lawsuits.

That is a rule about lawsuits. It says nothing about your returns, and nothing in it makes a private fund cheaper, more transparent, or easier to sell when you need the cash.

Question	What is known	What is open
Is it law?	An executive order exists. The rule is a proposal.	The final text of the rule
Will funds appear on menus?	Sponsors get legal cover if they document diligence	Which plans move, and when
Will you see a stand-alone private equity option?	Morningstar says it is unlikely	Whether that holds in the final rule
Can you get your money out?	Cohen says private markets have rules on when and how much you can withdraw	Whether plan wrappers change those rules

Morningstar's view is that most private equity and private credit products "are unlikely to pop up as stand-alone investment options" on plan menus. If you do see alternatives, expect them inside a target-date fund or a similar blend you don't pick yourself.

What is the catch?

Liquidity, and Cohen said as much. He told Yahoo Finance that private markets have "certain rules, rules when you can invest, rules when you can take out your money, and how much." He also called them "complex products."

The skeptics are blunt. Morningstar's author wrote that alternatives in 401(k)s feel "like a solution in search of a problem, a distraction at best, and a payday for high-fee asset managers at worst." I agree that fees are the real danger, and downside first is how I'd read any of these funds. Where I part ways is the "no problem" part. Most of the 90 million-plus savers in these plans have no access, and some of them have decades of retirement to fund and a fair case for diversifying. They just need the fee stack before the story. I've written before about why the $30 trillion alternatives forecast is marketing, not math, and the same skepticism applies here.

If you already hold an IRA or a self-directed account, you may own alternatives today without waiting for any rule. That route has its own traps, like prohibited transactions, so the diligence is yours to do either way.

Common mistakes

The first is assuming the executive order already changed your plan. It didn't. Your menu is the same today as it was yesterday, and it will stay that way until your plan sponsor decides otherwise.

The second is judging the product by the pitch. A manager's case for longevity risk can be sound and the fund can still carry fees that eat the benefit.

The third is forgetting you may already hold something like this. If you buy evergreen or interval vehicles outside your plan, read what a CLO interval fund launch signals for how the structure works.

What I'm watching next

I'm watching three things. The first is whether the final rule looks like the proposal after public comment. The second is whether the Supreme Court's 401(k) case changes fiduciary exposure, which I covered in Does the Intel 401(k) Case Open Alternatives to You?. The third is whether the first plans to add alternatives disclose their fees plainly.

FAQ

What is Trump doing to 401(k) accounts?

He signed Executive Order 14330 on August 7, 2025, aimed at widening access to alternative assets in 401(k) plans. It directs agencies to revisit their guidance. It doesn't put private equity in your account.

Will my 401(k) offer private equity soon?

Probably not as a stand-alone choice. Morningstar says that is unlikely. If your plan adds alternatives, they will more likely sit inside a blended fund. Ask your plan administrator what is being considered.

How do I check one of these funds?

Start with the redemption terms, then the total fees, then who manages it. If the fund caps how much you can withdraw, plan on waiting if others sell first. Read the fee table before the marketing page.

One thing to do today

Log into your plan and find the fund fact sheet for your default target-date fund. Look for any mention of private or alternative holdings, and write down the expense ratio. If you want me to flag the final rule when it lands, sign up for the free AIN briefing.

Educational content only. Not investment, tax, or legal advice. Not an offer or solicitation to buy or sell securities. Past performance does not guarantee future results. Private-market investments are illiquid and involve risk of loss, including total loss of capital. Consult qualified advisers. Angel Investors Network is not a broker-dealer or investment adviser.