By William J. Kelly, CAIA, Founder & Managing Member, Educational Alpha LLC
I was recently asked by a global regulator to address their team on the implications of an Executive Order (“EO”) on Democratizing Access to Alternative Assets for 401(k) Investors. On the eve of my virtual visit, they were kind enough to send me some of the topics they wanted me to cover along with a list of questions that had already been submitted by the audience. There was nothing unusual or surprising about this preamble peek into the pertinent points I planned to cover, except for one remarkably simple and foundational question. What is an Executive Order and is it binding law? Welcome to Civics 101 and what I learned about democracy and the democratization of EO’s.
An EO is issued by the sitting President of the United States. It is not required to be approved by Congress, but it also cannot create or override federal law. The power and purpose of EO’s are to take an action or to adopt policy to influence how existing laws are enforced.
Here are a few other (historical) fun facts about EO’s:
EO’s began in the George Washington administration where he issued a total of eight orders in the same number of years in office.
Every single President has issued at least one executive order except for William Henty Harrison, but then again, his presidency lasted only 30 days.
There have been over 14,000 EO’s issued across forty-seven presidential administrations. While you might think Donald J. Trump holds the prize for being the most prolific, so far that goes to FDR who issued a blistering 1,700 orders in his first term in office, which was an average pace of almost 450 per year. Trump’s annualized pace in his current year in office is a distant second at 306.
Needless to say, many of the EO’s (especially those issued in this more modern partisan era) have become subject to lawsuits, court challenges, and/or reversals by the next President. In the latter case, Biden reversed two dozen EO’s issued during the first Trump administration within just 100 days of his term in office. Not to be outdone, Trump’s “I do solemnly swear” oath was still echoing in the Capitol Rotunda in January of 2025 by the time he rescinded 78 of Biden’s EO’s.
Why, then, all the fuss about EO 14330 if it can just be reversed by a subsequent administration? Well, just like unscrambling an egg, when trillions of retirement dollars are already in motion, it will be near impossible to reset the course of these massive capital flows once they become embedded within ownership interests where the underlying asset is highly illiquid. This was the basis for the move away from “why” or “why not” in Democratizing a Solution FOR the 401k Investor.
What about lawsuits or other legal challenges? While there have been no notable actions thus far, we may just have to wait and see what kind of guidance we get from the Department of Labor in the next few months. While that might provide a more factual basis for a challenge, rest assured that the lobbyists who have pushed this agenda are deeply resourced and largely unchecked by any formidable foes.
Regardless of your view, the forthcoming ‘guidance’ will assuredly alter U.S. wealth creation and impact the retirements for millions of Americans. That is not something to be ceded solely to the private capital machinery as they longingly covet our nest eggs to fill an increasingly smaller commitment of institutional assets coming into these once hallowed halls.
A recent speech by SEC Commissioner Caroline A. Crenshaw may just be one of the very best (nonpartisan?) analyses on the subject, which frames the arguments on both sides so well. It should be required reading for any interested party, along with some required listening courtesy of a recent Educational Alpha podcast on this very topic with Aaron Filbeck.
Information is power, and this may just be a situation where you must empower yourself through informed consent. If the late William Henry Harrison was granted just one posthumous EO to call his own, he might simply repurpose one of his most famous quotes.
It is hereby ordered that “the liberties of a people depend on their own constant attention to its preservation.”
Seek education, diversity of both your portfolio and people, and know your risk tolerance. Investing is for the long term.
About the Contributor
William (Bill) J. Kelly, CAIA is the Founder and Managing Member of Educational Alpha, LLC where he writes, podcasts, and speaks on a variety of investment related topics, focused on investor education, transparency, and democratized access to differentiated risk premia. Previously he was CEO of CAIA Association since taking this leadership role in 2014 until his retirement in 2024. Prior to that, Bill was the CEO of Boston Partners, and CFO and COO of The Boston Company Asset Management, a predecessor institutional asset manager. In addition to his current role, Bill is also the Chairman and lead independent director for the Boston Partners Trust Company and serves as an independent director for the Artisan Partners Funds, where he is also Chair of Audit Committee and a designated Audit Committee Financial Expert. He is also currently an Advisory Board Member of the Certified Investment Fund Director Institute within the IOB (Dublin) which strives to bring the highest levels of professionalism and governance to independent fund directors around the world. Bill began his career as an accountant with PwC where he earned his CPA (inactive).
Learn more about CAIA Association and how to become part of a professional network that is shaping the future of investing, by visiting https://caia.org/