Now That Alternative Assets Are Allowed in 401k's Will You Invest In Them?

[Wrestleknownothing]

On August 7 Trump signed an EO allowing alternative assets in 401k's. 

If so, what kind would you be comfortable adding? 

The list includes:

• Private market investments (equity or debt) in non-public companies;
• Real estate equity or debt;
• Actively managed digital assets;
• Commodities;
• Infrastructure finance;
• Longevity risk-sharing pools;
• Other

We are still at least 6 months away from the details being worked out, but I am curious where people land.

[Wrestleknownothing]

I voted yes because I already invest in real estate equity and debt outside of my 401k. It would be more tax efficient to do it inside.

As for digital assets that is a hard pass. There is no tax advantage if you are buying and holding (say bitcoin). The only advantage comes if you actively trade it, and that is a fool's errand.

I would be skeptical of non-public companies, too. While I would love to own the next SpaceX, xAI, ChatGPT, etc. I just do not see those trickling down to my 401k. Instead I would have access to the exhaust that the professionals do not want. Pass.

Commodities do not particularly interest me. Too much research and too many professionals to compete against.

Not sure about infrastructure finance, but maybe.

Longevity risk-sharing may be of interest. I imagine there will be some inefficiently priced pools if you are lucky to find them.

[red viking]

Does this include trumps meme coins? I'm guessing yes. 

[Caveira]

5 minutes ago, red viking said:

Does this include trumps meme coins? I'm guessing yes. 

I thought the market crashed already?

[mspart]

Not particularly interested.   401K is doing fine as it is.  Just from the sound of it.   I'd need more info to make a judgement.  

mspart

[wrestlingguy]

16 minutes ago, Wrestleknownothing said:

I voted yes because I already invest in real estate equity and debt outside of my 401k. It would be more tax efficient to do it inside. I got burned with REITs 

As for digital assets that is a hard pass. There is no tax advantage if you are buying and holding (say bitcoin). The only advantage comes if you actively trade it, and that is a fool's errand. Agreed

I would be skeptical of non-public companies, too. While I would love to own the next SpaceX, xAI, ChatGPT, etc. I just do not see those trickling down to my 401k. Instead I would have access to the exhaust that the professionals do not want. Pass. Agreed

Commodities do not particularly interest me. Too much research and too many professionals to compete against. Agreed

Not sure about infrastructure finance, but maybe. Not sure what it entails and how the returns would be calculated.

Longevity risk-sharing may be of interest. I imagine there will be some inefficiently priced pools if you are lucky to find them. Risk pools?

I got burned during COVID with REITS. I invested a small amount of money into a venture called BREXIT REIT. They invested in retail buildings and college buildings. It all blew up during COVID and they liquidated the whole thing and sent me a fraction of what I put in. I would be scared to put more than a couple hundred into them anymore.

[Wrestleknownothing]

16 minutes ago, red viking said:

Does this include trumps meme coins? I'm guessing yes. 

Yes, as long as they are approved by you 401k administrator. But that seems unlikely.

10 minutes ago, Caveira said:

I thought the market crashed already?

Trump coin is down 70%, Melania is down 90%.

[Caveira]

3 minutes ago, Wrestleknownothing said:

Yes, as long as they are approved by you 401k administrator. But that seems unlikely.

Trump coin is down 70%, Melania is down 90%.

I didn’t buy either.   

[Wrestleknownothing]

11 minutes ago, mspart said:

Not particularly interested.   401K is doing fine as it is.  Just from the sound of it.   I'd need more info to make a judgement.  

mspart

One thing to look out for if you are not interested is whether you are invested in any target date funds. These will be the first target for alternative assets as the allocations are up to the manager rather than the individual. Alternatives tend to be high fee products so you will definitely see this. For example, earlier this week Goldman and T. Rowe Price announced a deal to sell Goldman sources alternative assets through T. Rowe's distribution network.

[Wrestleknownothing]

5 minutes ago, wrestlingguy said:

I got burned during COVID with REITS. I invested a small amount of money into a venture called BREXIT REIT. They invested in retail buildings and college buildings. It all blew up during COVID and they liquidated the whole thing and sent me a fraction of what I put in. I would be scared to put more than a couple hundred into them anymore.

There is definitely risk to all of this stuff, and that is a big one with commercial real estate. Who could foresee that a pandemic would radically, and possibly permanently, shift the demand for office space.

[wrestlingguy]

1 minute ago, Wrestleknownothing said:

One thing to look out for if you are not interested is whether you are invested in any target date funds. These will be the first target for alternative assets as the allocations are up to the manager rather than the individual. Alternatives tend to be high fee products so you will definitely see this. For example, earlier this week Goldman and T. Rowe Price announced a deal to sell Goldman sources alternative assets through T. Rowe's distribution network.

I never thought about that. I guess if you have any Target Date funds, keep an eye out on the underlying investments. Hopefully they exercise their fiduciary duty and inform the investors before they dump a ton of money into alternatives that are in my opinion a lot higher risk.

[mspart]

Thanks for the info.  

mspart

[wrestlingguy]

Just now, Wrestleknownothing said:

There is definitely risk to all of this stuff, and that is a big one with commercial real estate. Who could foresee that a pandemic would radically, and possibly permanently, shift the demand for office space.

I was lucky that I didn't have a lot in there but yeah who could have foreseen the whole damn country being shut down? I still look back and wonder how I didn't go nuts being trapped in my house for that long.