Private equity market access is expanding to retirement savers with 401(k) accounts. BlackRock and Empower are introducing private investment options. President Trump signed an executive order allowing private investments in 401(k) plans, citing competitive returns and diversification benefits. Private equity firms raise money to buy, manage, and sell companies for profit.

Private equity offers higher returns than the stock market but comes with higher risk. Wealthy investors favor private equity due to its high upside potential. However, private companies lack transparency compared to public ones. Private equity tends to be illiquid, with money tied up for months or years.

While private investments in 401(k) plans present opportunities, some fear the risks are too steep for everyday savers. Senator Elizabeth Warren expressed concerns about weak investor protections and lack of transparency. Empower responded, emphasizing the democratization of private investing. Legislation explicitly allowing private investments may provide more comfort to the industry.

The trend of offering private investments in 401(k) plans is expected to grow. More providers may follow BlackRock’s lead in including private investments in target-date funds. The industry may eventually allow retirement savers to invest in funds entirely made up of private investments, but legislative approval or executive orders may be needed.

Read more at Yahoo Finance: Trump opens 401(k)s to private equity. Here’s how much to invest.