This article from the White House discusses the potential effects of expanding retail investor access to alternative investments via defined contribution plans. It highlights that such changes may offer significant benefits for plan participants, including better diversification, improved risk-adjusted returns, and increased retirement income. Furthermore, the article outlines advantages for fund managers, private companies, and the financial markets at large, suggesting a potential GDP increase of approximately $35 billion.

The Council of Economic Advisers (CEA) indicates that younger investors, particularly those in their 20s and 30s, could see a 2.5 percent increase in their annuitized lifetime income as a result of investments in private equity. In comparison, older investors may experience more modest increases, ranging from 0.5 to 1 percent. This disparity suggests that younger investors are more likely to benefit from the long-term growth prospects associated with alternative investments.

Overall, the article argues that broadening retail investor access to private equity and other alternative investments through defined contribution plans could enhance portfolio performance and have a positive impact on the economy. It also points out that the estimated GDP benefit focuses solely on private equity access, indicating that additional benefits might arise from including other investment types, such as hedge funds and venture capital. The findings emphasize the potential for this policy change to improve financial outcomes for individual investors and the wider economic environment.

Original: article