What should we in Britain make of this news from over the pond (thanks FT)

The president on Thursday signed an executive order that will open up 401k retirement plans, worth an estimated $9tn, to alternative investments including cryptocurrencies, private equity and real estate.

I think we have the time to watch and see what happens, both in terms of take up by retail investors and in terms of how it works for those who choose to get involved.

Actually, Pension PlayPen will be having a debate on whether Bitcoin should be a product used by institutional and retail pension investors in the UK. You can get to the meeting at 10.30 next Tuesday by following this link

It is coincidental that we have Cartwright talking at this time, although the FT did give us forewarning. There were a series of scoops by Antoine Gara, who first revealed the president’s deliberations in May and then reported that crypto and other alternatives would be part of the 401k order.

The FT’s view is that Crypto has opened the door for their 401K (DC) pension funds to follow in behind

Crypto executives have become some of the president’s most ardent supporters, and Trump’s family has sizeable stakes in digital asset businesses.

“It is not clear to me that private markets would have had the juice to get this through on their own,”

one top adviser told  FT.

For private equity, though, it’s the destination not the journey that matters here. They’ve fought hard for access, arguing that savers are missing out on big gains that have long been available to wealthy investors, and it looks like they’ve won.

Will this open doors in Europe and especially in the UK. The signs so far are not good. The French are not taking kindly to what they see in Private Equity

Private equity has become a big fan of France’s laboratory sector, and with much higher margins than the rest of the country’s health industry, it’s no surprise.

The likes of EQT and Ardian have taken over companies through large leveraged buyouts in recent years, loading them with debt.

The rationale was that the companies’ outsized profits would more than cover interest payments. Come maturity time, those profits would surely attract credit investors to participate in refinancings as well.

Now Paris is throwing its assumptions out of the window. A government audit published last month, missed by large swaths of credit investors, has threatened the sector with profit caps.

The Government’s audit of Private Equity is tough

“Measures must be taken to bring the cost of biology back to a fair price”, including “the introduction of profitability-based regulation”,

it said. The result would be the “restructuring of large groups”, it added.

And the UK?

We have thrown open several areas of our economy to private equity, most notoriously the water sector. What has happened in Thames Water has been disastrous for the environment and for consumers with rivers and lakes in a filthy state and water bills ever higher.

The question for us , watching as we do what the French Government is doing to prevent the wrong kind of financing of certain sectors of its economy and the impact of American PE and Crypto on US savings habits is likely to be major discussion points in the second half of the year.

The US leads the way, UK wealth managers will follow

My personal feeling is that we have a conservative institutional regime regulated by TPR, represented by Pension UK and led by professional trustees and actuaries who have no wish to embrace crypto and PE funds, without a clear understanding of what results. This is going to mean it may actually lag retail.

Retail investment, regulated by the FCA , led by wealth managers and entrepreneurs is more likely to get stuck in. It is investing for those who have the appetite for gains and losses, have shown it through SEIS , EIS , Venture Capital and may look to follow the United States in investing for the future using Crypto and the more aggressive funds accessing Private Equity.

KKR has just announced it will be allowing wealthy investors considerably more scope to take risk

Whether, out of this discussion can come a collective approach to investing ordinary people’s money that takes a view on these alternative strategies is a question that will not be answered immediately. Indeed the debate will only be data based in the mid 2030s. Right now we are watching ,listening and measuring.

I will be interested to hear from a retail adviser, Josh Spence. who has been lined up next Tuesday to argue for alternatives in wealth portfolios. I hope he’s plugged into what’s happening in the USA!