US President Donald Trump has issued a measure allowing 401k retirement plans to include alternative assets such as private equity, private credit, infrastructure, and cryptocurrencies, the Financial Times reports. This move to reshape the c. USD 9 tn retirement savings market follows years of lobbying from big private capital firms and crypto groups.

Proponents of the move argue it will open up higher returns for the some 90 mn retirement savers. Some, including the PE-backed lobby group Defined Contribution Alternatives Association, have also argued that retirement plans’ inability to deliver on the same returns as PE groups could be grounds for 401k contributors to sue. Carlyle Group CEO Harvey Schwartz presents the move as an opening up of these higher returns, which “wealthy clients have had access to … for a very long time.”

The move could also help better diversify 401k funds, especially with the Magnificent 7 making up a large portion of many retirees’ invested savings. “We basically have leveraged the retirement system of the country to Nvidia,” said Apollo Global Management CEO Marc Rowan.

Private equity is understandably eager to access the retirement plan market given its size, especially with assets held under 401k plans tripling since 2007 to a current USD 9 tn.

But critics allege that the decision will open up US pension holders to new risks — that many may not be fully aware of. “Retail investors are going to be exposed to a completely different type of asset without necessarily realizing,” Better Markets Director of Securities Policy Benjamin Schiffrin told Financial Times.

Alternative assets also come with higher fees and significantly less transparency. Unlike 401k plans today that are invested in stocks and bonds that are easy to value and sell, alternative assets are often less liquid and harder-to-sell assets. Fees could also rise significantly — from the current 0.3-0.5% for most 401ks to as much as 0.8% — raising questions about whether savers will be willing to pay more for the chance of higher returns.

The order also ties in with Trump’s push to loosen rules on digital assets, which one White House advisor told the paper was a key reason the order was passed. However, private equity groups remain cautious about being linked to crypto volatility, but accepted the risk for access to retirement savings, insiders told the salmon-colored paper.

MARKETS THIS MORNING-

Asian markets are mixed this morning, as traders await confirmation on whether the US and China will extend their temporary tariff truce due to expire on August 12. Hong Kong’s Hang Seng is up 0.1% and Korea’s Kospi is flat, while the Shanghai Composite is inching down in the red and Japanese markets are closed for a public holiday. Meanwhile, Wall Street futures are muted following strong gains last week.

EGX30

36,110

+0.8% (YTD: +21.4%)

USD (CBE)

Buy 48.43

Sell 48.56

USD (CIB)

Buy 48.46

Sell 48.56

Interest rates (CBE)

24.00% deposit

25.00% lending

Tadawul

10,899

-0.3% (YTD: -9.5%)

ADX

10,312

-0.1% (YTD: +9.5%)

DFM

6149

+0.3% (YTD: +19.2%)

S&P 500

6389

+0.8% (YTD: +8.6%)

FTSE 100

9096

-0.1% (YTD: +11.3%)

Euro Stoxx 50

5348

+0.3% (YTD: +9.2%)

Brent crude

USD 66.59

+0.2%

Natural gas (Nymex)

USD 2.99

-2.5%

Gold

USD 3491.30

+1.1%

BTC

USD 118,210.90

+1.5% (YTD: +26.4%)

S&P Egypt Sovereign Bond Index

885.10

+0.1% (YTD: +24.8%)

S&P MENA Bond & Sukuk

147.74

-0.1% (YTD: +4.9%)

VIX (Volatility Index)

15.15

-8.6% (YTD: -12.7%)

THE CLOSING BELL-

The EGX30 rose 0.8% at yesterday’s close on turnover of EGP 4.3 bn (17.2% below the 90-day average). International investors were the sole net buyers. The index is up 21.4% YTD.

In the green: Orascom Development Egypt (+5.4%), Misr Cement (+4.3%), and EFG Holding (+3.5%).

In the red: Juhayna (-1.0%), Eastern Company (-0.6%), and Egypt Kuwait Holding-EGP (-0.4%).

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