Private Equity’s Fast Lane to 401(k)s

Drive to add alternative investments in workplace retirement plans has quickly accelerated in 2025 as regulatory roadblocks fade, but fiduciary concerns persist

It’s 2025 and the once vast distance between private markets investments and their most favored new destination—the $8.7 trillion U.S. 401(k) market—is shrinking fast.

Once Donald Trump won the presidential election last November, the stars quickly began aligning to light private equity’s road into 401(k)s—with some major roadblocks being cleared along with way. There’s almost no way to overstate how fast and furious the rush to make private equity in 401(k)s a reality has occurred, with several big announcements made in recent months.

(Editor’s Note: This is the cover story from Issue 2, 2025 of 401(k) Specialist Magazine. Click here to read the entire article as it appears in the magazine.)

Private equity—an investment class traditionally reserved only for high-net-worth individuals and institutional investors—offers the potential for higher returns but also comes with different types of risk that may not align with the financial security and predictability most 401(k) participants expect.

Cracking the 401(k) market has long been high on the wish list for private equity giants such as Blackstone, KKR, and Apollo, who estimate the development would lead to hundreds of billions in potential inflows. And at a time when traditional funding resources seem to be somewhat tapped out.

Institutional investors—pension funds, endowments, and sovereign wealth funds—have historically been the dominant backers of private equity. But allocations to private equity are already high for many of these institutions, limiting their capacity to increase exposure further. And higher interest rates have also made fixed-income investments more attractive again, diverting some capital away from alternatives like PE.

Wall Street firms have been pushing long and hard to get private investments into the hands of individual investors, and they see access to the $8.7 trillion held in 401(k)s by about 70 million active participants and millions of former employees and retirees as crucial to future growth.

While concerns around private equity—such as higher fees, limited liquidity, and potential ERISA liability—persist within the workplace retirement plan industry, a growing number of prominent industry leaders argue that now is the time to give 401(k) participants the opportunity to benefit from the kind of growth that has historically outpaced public markets.

Among them:

• In March, BlackRock CEO Laurence Fink used his annual letter to shareholders to emphasize the importance of expanding access to private markets—such as private equity, credit, and infrastructure—for everyday investors, including those saving in 401(k) plans.

• In April, State Street Global Advisors announced the launch of its State Street Target Retirement IndexPlus Strategy, providing access to private market exposures in a diversified strategy for DC plans and their participants.

• In May, T. Rowe Price Chair, CEO and President Rob Sharps said it’s only a matter of time until private market alternatives gain access to DC plans—and if research indicates it would result in better outcomes for 401(k) participants, he said T. Rowe Price will offer it.

• Also in May, recordkeeping giant Empower announced it will start allowing private credit, equity and real estate in some of the 19 million retirement accounts it administers in the third quarter of this year, partnering with seven firms to offer these investments.

• In late June, Great Gray Trust Company and BlackRock announced that Great Gray’s first target date retirement solution featuring private equity and private credit exposures will be powered by BlackRock’s proprietary glidepath that strategically allocates across public and private markets.

Throw in that the Trump administration is reportedly contemplating issuing an executive order that would direct federal agencies—including the Department of Labor, the Treasury Department, and the Securities and Exchange Commission—to explore allowing private equity and other private capital investments within 401(k) plans, and cumulatively you have a whole lot of movement in the span of four months.

Why Movement is Accelerating

The private equity-in-401(k)s movement began to take shape during President Trump’s first administration, when in June 2020 the EBSA issued an information letter explicitly saying private equity investments can be included in diversified investment options—like target date funds or balanced funds—offered through 401(k) plans, provided plan fiduciaries follow ERISA guidelines and prudently assess the risks.

This letter did not open the door to direct retail-style investments in PE, but it removed a major legal and regulatory obstacle by affirming that PE could be used as part of professionally managed asset allocation products in DC plans.

Under the Biden administration, the DOL urged caution in its own guidance on private equity in retirement savings, but stopped short of reversing the Trump-era policy.

Uptake prior to this year has been slow, primarily due to looming legal liability fears among retirement plan managers also worried the typical 401(k) investor has little understanding of private markets investing.

“BlackRock estimates that over 40 years, an extra 0.5% in annual returns results in 14.5% more money in your 401(k). It’s enough to fund nine more years of retirement.”

BlackRock CEO Larry Fink

A Trump executive order and new guidance from regulators could strengthen legal safeguards for retirement plan sponsors, removing barriers that have deterred adoption to date. EBSA, assuming Trump Nominee Daniel Aronowitz is confirmed, would likely work to raise the bar for excessive fee lawsuits, further easing concerns. And in June, the SEC’s Office of the Investor Advocate announced it would focus on evaluating the inclusion of private market investments in retirement plans as a priority in FY2026.

Interest—from PE firms and retirement firms alike—has spiked as liability concerns ease under the Trump administration and desire increases to provide retirement savers access to the once-forbidden fruit of historically higher-performing private market assets.

A 2023 report from Georgetown University’s Center for Retirement Initiatives claimed U.S. DC plans are missing out on potential returns of $35 billion a year by not incorporating private equity and real estate investments like defined benefit plans do. Studies (such as those by Cambridge Associates and PitchBook) often show private equity generating 3-5% higher annual returns than public stocks over rolling 10- and 20-year periods.

“Pension funds have invested in these assets for decades, but 401(k)s haven’t. It’s one reason why pensions typically outperform 401(k)s by about 0.5% each year,” Fink wrote in his 2025 letter to shareholders. “Half a percent doesn’t sound huge, but it adds up over time. BlackRock estimates that over 40 years, an extra 0.5% in annual returns results in 14.5% more money in your 401(k). It’s enough to fund nine more years of retirement.”

Meanwhile, the old public-company fishing hole for 401(k)s has dried up somewhat. There are far fewer public companies today than there were 30 years ago, as more companies prefer to remain private. BlackRock notes that 81% of U.S. companies with more than $100 million in revenue today are privately held. At their peak in 1996, there were 7,300 publicly traded companies in the U.S. while today there are about half as many. The consider that, according to JPMorgan data, the number of private companies in the U.S. backed by PE firms has grown from 1,900 to 11,200 over the last two decades.

Kind of reminds you of the old Willie Sutton quote about why he robbed banks. “Because that’s where the money is.”

If investors want to own the whole market and have a truly diversified portfolio, proponents of PE in 401(k)s argue they need access to both public and private companies.

NEXT PAGE: Leaving the Sidelines