The White House has released a report examining the benefits of expanding retail investor access to alternative investments through defined contribution plans, such as 401(k)s. The Council of Economic Advisers (CEA) emphasizes that this change could significantly benefit plan participants by providing better diversification, higher risk-adjusted returns, and improved retirement income. Additionally, the report suggests that fund managers, private companies, and financial markets would experience positive outcomes, including enhanced liquidity and price discovery, contributing to overall economic growth.

The analysis indicates that all age groups could benefit from allocating a portion of their defined contribution plans to private equity, with younger investors potentially reaping the most significant rewards. Specifically, the report notes that the two youngest cohorts could enjoy an increase of approximately 2.5 percent in their annuitized lifetime income, while older cohorts may gain between 0.5 to 1 percent. This illustrates the varying impact of investment strategies on different demographic groups within the retirement planning landscape.

Overall, the report estimates that improving access to private equity for retail investors through defined contribution plans could result in a GDP benefit of up to $35 billion, representing about 0.12 percent of GDP. This figure is limited to the impact of private equity alone, and there may be further economic advantages from extending access to other alternative investment vehicles such as hedge funds or venture capital. The findings suggest that broadening investment opportunities for retail investors could foster a more robust and resilient economic environment.

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