401(k) Savers Have Faith in Private Assets — Probably Too Much

More investors want an invite to the private asset party. 

Over half of investors in 401(k)s and similar workplace retirement plans say they’d put money in private assets if offered, up from 45% in 2025 and 36% in 2024, according to a recent Schroders survey. 

Private investments are increasingly making their way into everyday investors’ portfolios as new products offer access with lower minimums and more liquidity. While less than 1% of the $14 trillion in assets in defined contribution plans are in private assets, the Bipartisan Policy Center found, that’s likely to change as plan providers like Empower and State Street look for new ways to introduce private assets to retirement savers. 

“It’s hard to argue against providing access,” said Jean-Pierre Aubry, associate director of retirement plans and finance at the Center for Retirement Research at Boston College. “But of course, it comes with responsibility.” 

Worth It?  

Private assets come with potentially high fees, opaque valuations and illiquidity. And, they may not actually provide investors with what they’re looking for: 

• Seventy-seven percent of plan participants say private assets offer an opportunity for greater investment return, and 78% said private assets enhance a 401(k)’s diversification, Schroders found. 
• But the dispersion of performance for private assets is really wide, Aubry said. With public equities, the difference between the best active manager of a fund and the worst active manager of a fund is not that large. “Private assets are a whole different ballgame,” Aubry added. “Once you get out of the top quartile, it’s a bloodbath. It’s really hard to pick winners, and if you don’t pick winners, you end up with a real loser.” 
• He’s skeptical about the diversification benefits, too. “In a place like America, where we have a very deep and broad public market, the idea that there’s like a whole diversified sector out there that can only be accessed through private assets is really hard for me to imagine.” 

Looking Ahead. It takes a lot for an investment to make it into a retirement plan, since a plan fiduciary needs to give it the go ahead. “401(k) assets are probably among the most carefully considered assets available in the world,” said Josh Lichtenstein, head of the ERISA fiduciary practice at law firm Ropes & Gray. The reason we haven’t seen them in retirement plans on a wider scale is that fiduciaries have been worried about being sued, he said. But the Department of Labor has a proposed rule which should be finalized this year or early next designed to give those fiduciaries confidence that as long as they follow an appropriate process and can show their work, it should be easier for them to win those lawsuits, he said. “I think there’s genuine relief on the way there.”