Building the Infrastructure Needed to Bring Private Assets into 401(k)s: A Roadmap for Asset Managers

With momentum building around the prospect of introducing private assets into 401(k) and other retirement plans, the pressure on asset managers to deliver is intensifying. While the industry will have to navigate considerable challenges to achieve that goal, I’m confident that it will overcome these hurdles and lead the infrastructure transformation needed for success.

Retail investors are clamoring for access to diversified portfolios, and the enticing returns institutional investors are generating in private markets. Responding to that growing demand, regulators are clearing the path for the inclusion of private assets in retirement accounts and for expanded access to private markets for retail investors in general.

With regulators and investors both on board, the integration of private markets into retirement plans and retail investment portfolios seems like a sure thing. But hold on. If scaling access to private assets were easy, the industry would have done it a long time ago, with or without 401(k)s. Historically, private markets have characteristics that make them inherently hard to scale. In fact, that’s part of the reason investors in private assets get paid a premium relative to public investments—they are accepting the unique constraints that come with private investments.

A Roadmap for Asset Managers

For those reasons, the asset management industry faces some real obstacles in opening private markets to such a huge universe of new investors. To deliver private assets into 401(k) plans and retail investment portfolios at scale, asset managers must address several significant challenges, each of which also represents a major opportunity to modernize the industry and define new standards:

1. Data standardization: Currently, investors in most private equity and credit funds lack an easy way to see what assets the fund holds and how they’re performing. Finding reliable financials on private companies is difficult, and sometimes impossible. Even when data exists, it is often unverified, unstructured and delayed. Expanding data access and accelerating standardized reporting isn’t just a requirement, it’s a chance for asset managers to set a new benchmark for transparency and investor trust in private funds.
2. Reimagined valuation and pricing: Providing more frequent, transparent and reliable valuations is not just a challenge, it’s an opportunity for managers to build trust, support plan sponsors in meeting fiduciary obligations, and forge new industry standards. While private assets currently lack intraday pricing, managers can look for opportunities to leverage market-informed valuation models and clear governance frameworks to deliver regular NAV updates that meet the needs of 401(k) plans and retail investors.
3. Participant protection and fiduciary requirements: Retirement plans operate under a fundamentally different standard: fiduciaries must ensure investments are suitable, diversified, and cost-appropriate for every participant. That raises questions unique to private assets—including fair access to liquidity, fee transparency, valuation governance, and guardrails around investor education. Any solution that introduces private assets into 401(k)s must address these obligations explicitly, providing sponsors with confidence that participant outcomes remain the guiding principle.
4. Making private markets repeatable: To service a broad universe of retail investors and 401(k) plans, asset managers will have to create efficient and repeatable workflows transforming private markets from one-off bespoke transactions into scalable frameworks capable of handling large diverse investor base. Technology and innovation will become the key enablers that allow private assets to reach broader audiences.
5. The infrastructure reset: To operate at the level of efficiency needed to service a retail investment audience, asset managers will need a new and more modern infrastructure that supports both investment decision workflows and operational confirmation and reporting. The upgraded systems will have to connect front-office (for research and trading) to back-office (for confirmation and settlement), and automate processes across front-, mid-, and back-office functions. At the heart of this new system must be a single, trusted data backbone for private market positions, valuations, and exposures. The data management platform must feed real-time simple dashboards that enable professionals in both the front office and back office to see up-to-date data in a format that aggregates public and private assets.
6. Tokenization as an accelerator: Many of the operational challenges posed by private assets can potentially be solved through innovation. Tokenization and distributed ledger technology could redefine how private assets are bought, sold, and valued, making previously illiquid investments more transparent, efficient, and accessible. The blockchain was designed to support operational efficiency, expand access and enhance liquidity.  In some ways, markets for private equity, credit and other private assets present a perfect use case for the blockchain. Tokenizing private investment funds opens the door to fractional ownership, automated recordkeeping, and faster settlement, which would make it easier for retail investors and 401(k) plan participants to participate.

A New Infrastructure Built on Innovation

These are big challenges. What’s even bigger, however, are the incentives asset managers face for successfully introducing private assets into 401(k) plans and retail investment portfolios. Now that regulators are opening the door to these markets, the prospect of massive new inflows will drive asset managers to invest whatever it takes in time and resources to build out an ecosystem that supports the inclusion of private assets.

The roadmap is clear: richer data, scalable infrastructure, automated workflows, modern valuation models, and new liquidity tools like tokenization must all be put in place. Delivering those critical features will require technology designed for the complexity and scale of private markets—and built to meet the transparency standards of the 401(k) landscape.

Technology that eliminates fragmentation and brings private assets onto a unified operating model will separate the leaders from the followers as trillions in new flows enter the market.

SEE ALSO:

• Blackstone Joins Empower’s Private Markets Investment Partnership Program
• DC Participants Open to Private Markets—and AI—with Guardrails: Invesco Survey
• Plan Sponsors See Private Markets Investments Improving Retirement Outcomes

Rachel Puleo

Chief Product Officer at Broadridge Asset Management Solutions | Web

Rachel Puleo is Chief Product Officer, Asset Management Solutions at Broadridge, a leading global technology provider that helps the financial services industry operate, innovate, and grow by delivering the critical infrastructure and technology solutions that power governance, capital markets, and wealth and investment management.

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