Trump wants your 401(k) in private equity — just as the industry drowns in thousands of unsold companies

In a persistently high-interest-rate environment, more market observers fear the worst for these debt-saddled businesses. Matt Parr, communications director at the nonprofit Private Equity Stakeholder Project (PESP), explained to Moneywise that “Large private equity-driven debt loads can leave companies more vulnerable to financial distress, closures, and layoffs.”

Findings in PESP’s Private Equity Bankruptcy Tracker revealed just how much of a mess this sector is currently in. Of the biggest U.S. bankruptcy filings in 2025 (all with at least $1 billion in liabilities), 54% were private equity companies. Private equity firms were also in 51% of U.S. corporate bankruptcies with liabilities over $500 million.

In total, PESP noted that private equity firms took up 10% of 2025’s corporate bankruptcies, even though they only make up about 7% of the U.S. economy.

Is your retirement going private?

Despite these alarming figures, President Trump is pushing for more access to private equity in retirement portfolios. In 2025, the White House issued Executive Order 14330, which focused on broadening the range of allowable investments in 401(k)s.

Alongside crypto and commodities, this order explicitly allowed for “private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies.”

More recently, the U.S. Department of Labor proposed a rule to make these alternative investments a reality for “more than 90 million Americans.” U.S. Secretary of Labor Lori Chavez-DeRemer touted the potential of these opportunities, arguing, “This greater diversity will drive innovation and result in a major win for American workers, retirees, and their families.”

Many market experts, however, aren’t so excited about private equity deals for the general public.

Rather than providing new growth opportunities, Matt Parr cautioned that “The risks associated with the private equity business model do not disappear when these investments are packaged for retirement savers. Yet the Trump administration’s proposal would give workers greater exposure to private equity investments while limiting their ability to sue plan sponsors and other fiduciaries.”

Parr also told Moneywise that the PESP was particularly worried about the private equity industry’s attempt to “loosen restrictions on cross-trading between funds,” which could “allow firms to move assets between investment vehicles.”

As Parr elaborated, “Our concern is that loosening those restrictions as private markets move into 401(k)s could create a pathway for hard-to-sell or underperforming private equity assets to be moved into funds that retirement savers are exposed to.”

Besides safety and transparency concerns, there’s a more practical problem with bringing private equity to retirement portfolios: Higher fees.

Morningstar analyst Jason Kephart expressed this concern over fees eating into earnings to Reuters, arguing that firms “might be even underrepresenting the actual cost to the end investor, and I have a hard time seeing how plan sponsors are going to get comfortable with that.”

Private equity still has an image problem

​Judging by recent bipartisan polls, many Americans probably wouldn’t feel comfortable propping up private equity firms with their 401(k)s.​