U.S. President Donald Trump signed an executive order Thursday that aims to allow Americans to invest in assets such as private equity, cryptocurrency, real estate and other alternative investments in their 401(k) retirement plans.

The idea is to open up access to investments that are usually only available to institutional investors, so that everyday savers can diversify their portfolios and potentially boost long-term returns. It’s also a major victory for industries looking to tap into the hundreds of billions in wealth sitting in retirement accounts.

The shift is part of a broader trend: making private markets and other alternative assets more accessible to individual investors. And in Canada, that shift is already under way.

Private investments have long played a role in Canadian retirement savings, but mostly through large institutions that invest on others’ behalf, such as pension plans, sovereign wealth funds and family offices. However, in recent years, individual investors have increasingly been able to directly access these kinds of assets.

While Mr. Trump wants to allow private assets to be available in 401(k) accounts, which are workplace retirement plans, Canadians have the option to invest in certain private investments in self-directed RRSPs.

For example, Wealthsimple launched a private-equity fund with LGT Group in 2023 that allows Canadians to use their registered retirement savings plans and tax-free savings accounts to invest in the fund. This gives everyday investors a chance to invest in companies that are not traded on stock markets.

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Recently, Northleaf Capital Partners and Mackenzie Investments teamed up to launch a private-equity fund available to accredited investors. The fund is registered-plan eligible.

But some critics say alternative investments, especially in retirement portfolios, can result in increased risk, higher fees and reduced transparency around people’s nest eggs.

“I’d be super careful about getting into private equities,” said Benjamin Felix, chief investment officer and portfolio manager at PWL Capital.

In Canada, RRSPs are allowed to hold a wide range of what the Income Tax Act deems “qualified investments.” These include cash, GICs, bonds, mutual funds, ETFs and publicly traded shares.

Certain alternative assets, such as shares of a private corporation, may also be held in a self-directed RRSP as qualified investments, but only if they meet certain conditions.

Holding investments in an RRSP that are non-qualified or prohibited can result in tax penalties equal to 50 per cent of the assets and 100 per cent of any income or gains.

For example, cryptocurrencies are not qualified investments, although it is possible to hold crypto in an RRSP indirectly through an ETF or similar security.

Similarly, it is also possible to have shares of a private Canadian company in an RRSP. However, an RRSP plan holder is prohibited from holding shares of a corporation in an RRSP where they hold more than a 10-per-cent interest.

Canadians can also invest in other private alternative investments in their RRSPs, such as certain private real estate investments.

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Many people are drawn to alternative investments because of ”an enhanced return potential,” said Simon Wong, certified financial planner and head of financial planning at Blueprint Financial. “It also obviously offers diversification benefits.”

But these investments aren’t simple. Private-equity funds are often illiquid, meaning they can be hard to sell, and they typically come with high fees. There’s also the risk of losing your entire investment. As platforms make it easier for average investors to buy into private funds, some experts worry that people may not fully understand what they’re putting their money in.

Many private funds also have long lock-up periods, where money is typically tied up for five to 10 years before investors see any returns. Those features don’t always mesh well with retirement planning, Mr. Wong said.

Private-equity fees can be steep. The management fees for private equity are typically around 6 per cent, Mr. Felix said. For Wealthsimple’s fund, the management fee is 1.5 per cent and there’s a 12.5-per-cent performance fee, provided the deal earns at least an 8-per-cent return, according to the service’s website. You also need at least $50,000 in liquid assets with or outside of Wealthsimple, and there’s a $10,000 minimum investment.

“The vast majority of Canadians simply don’t have a way to invest in this asset class, so they’ve been unable to take advantage of the diversification it offers, not to mention its compelling returns over the previous two decades,” Wealthsimple said in a statement announcing the launch of the fund in 2023. “So Wealthsimple is opening access to more investors as part of our managed investing platform.”

Some experts say the push to get retail investors into private equity is about finding buyers for assets that are hard to sell.

“The suspicion is that … it’s getting tougher to sell those assets and they do want to offload, or they need liquidity,” Mr. Felix said. “The next layer of investors that can buy from them is retail, the relatively unsophisticated investors who are not super well suited to evaluate whether they’re getting a good deal when they buy these assets.”