Resources/Weekly Insights

Volume 14, Edition 21 | July 14 - July 20, 2025

Caution: Alternatives Coming to a 401(k) Near You?

Doug Walters, CFA

A proposed policy shift could bring private investments into 401(k) plans. We explain why this move raises serious concerns for retirement savers—and the employers who serve them.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

You’ve probably heard about private equity and maybe private credit. You have certainly heard about cryptocurrency. They have a certain cachet—whether prestige or pioneering appeal. Now, these exclusive investments may soon be on their way to your 401(k). That’s raising important questions. What could go wrong with putting opaque, high-fee investment options into the retirement plans of everyday savers? Quite a bit in our opinion.

Recent headlines suggest that efforts are underway to include alternative investments in employer-sponsored retirement plans. While the headlines may tout this as a move toward investor empowerment, we believe it raises more concerns than opportunities for the typical retirement saver.

At Strategic, we’ve done a deep dive into private investments (ask your advisor if you’d like to see our white paper on the subject). Our evidence-based conclusion? The vast majority of individual investors are better off steering clear.

The reasons are many: high fees, poor transparency, illiquidity, excessive risk, and questionable net performance. While the marketing around these products often suggests superior returns, the evidence shows otherwise—particularly after fees and relative to their risk profile¹.

There is currently a glut of private market investments. As large institutions like Harvard and Yale reduce their private holdings, fund managers are looking for new buyers—and increasingly, they’re turning to individual investors. We’ve seen it firsthand: the volume of private investment pitches in our inbox has surged. Now, the 401(k) market appears to be the next target.

We understand the appeal of adding “something different” to a portfolio. But in this case, different does not mean better. In fact, it may mean harder to understand, harder to exit, and harder to evaluate.

As we discussed in this week’s podcast (Episode #19 – Retirement Investing), 401(k) plans often offer target retirement date funds, risk-based funds and individual asset class funds. Every situation is different, but generally speaking, we typically recommend one of those first two options as they are professionally managed diversified funds. If alternatives are embedded inside diversified target-date or risk-based funds, the impact may be modest. But if they begin showing up as standalone options on the fund menu, we believe the risks to investors increase substantially.

We support innovation in retirement planning, but not at the cost of investor clarity and long-term financial security. If this policy shift becomes reality, we’ll continue advocating, in our role as fiduciary, for evidence-based, transparent solutions that serve the best interests of retirement savers—not product manufacturers.

1. Walters, Douglas, “Alternative Investments – An evidence-based perspective on the merits of private investments in wealth management client portfolios,” Strategic Financial Services, July, 2025.

2.7%

CPI Inflation

CPI inflation came in at 2.7%. While this was in line with expectations, it is a jump up from the 2.4% in May. Inflation has been rangebound between in the mid-to-high “2s” for the past year. The Fed is hoping to see a move towards its 2% target, though tariffs are likely to be a headwind.

Headline of the Week

Is the Treasury Secretary Fed Up?

Treasury Secretary Scott Bessent is walking a tight rope navigating between Wall Street’s desire for an independent Fed and the administration’s desire for lower rates. This week’s musings from the President hinting that Chairman Powell’s days are numbered coupled with bank CEO’s uniformly backing the Fed chair are testing Bessent’s balancing skills. As illustrative, the Treasury Secretary was quoted as calling the President’s musing as equivalent to “working the refs” rather than a serious precursor at trying to oust the Fed chief. At the same time, he has detailed plans to name Powell’s successor and has strongly hinted that Powell should leave the Fed once his term as chair ends. For now, Bessent seems to be maintaining his balance as markets went through volatility around the early headlines from the President.

However, this week’s inflation report highlighted the first indications that tariffs could be filtering into inflation numbers, thereby largely taking a July rate cut off the table. So, these balancing skills will increase in importance as the next Fed meeting approaches.

The Week Ahead

A rate decision from the European Central Bank and earnings from the first two of the magnificent seven are the only major things for markets to watch next week.

Finnish Line

The European Central Bank (ECB) is not expected to alter interest rates on Thursday, but the end of the cutting cycle is in sight.

Investors will listen to president Lagarde for confirmation if they are indeed done cutting or under what conditions another cut may be on the table and when.
Reading between the lines, tariff-induced anxiety needs assurance that ECB will act if needed to calm any situation.

Not So Magnificent

Telsa and Alphabet, the parent company of Google and YouTube, are on the docket to release 2nd quarter earnings on Wednesday.

Sorry Alphabet and about 20% of the S&P 500 constituents reporting next week, but most investors will be focused on Tesla’s results.
Forecasts for Tesla call for a double-digit revenue decline in the quarter, to $22.8 Billion.
Option market implied volatility is currently at 6.8% in either direction for the stock, meaning whatever Elon Musk serves up, the move in the stock is expected to be sizable.
Telsa’s stock is down almost 20% so far this year while Alphabet is down around 2%, making both stocks not so magnificent, joining Apple in the underperforming column for the year.
Nvidia and Microsoft on the other hand have tacked on over 20% gains in 2025.
It is early in the earnings season, but it will allow these two stocks to control the earnings narratively for at least a week.

On the Other Side

The Peoples’ Bank of China has a meeting Monday but is not expected to change rates and a consequential election for upper house seats in Japan is expected to yield a loss for the ruling coalition on Sunday.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on total client assets of over $2.5 billion.

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