Ungregarious assets currently account for less than 1% of assets in 401(k)s and other defined contribution plans, but some significant asset managers and plan administrators want to increase that share.
“We are seeing institutions worldwide blend open and private markets, and in many cases, it’s been a great investment,” said Larry Fink, chairman and CEO of BlackRock, at a zenith on retirement that the company sponsored last week. More than half of the $11.6 trillion in assets supervised management at BlackRock are in retirement products.
Fink and other proponents say a key reason for including private assets in the $12.5 trillion workplace retirement pattern market is the need for greater portfolio diversification.
Over the last 20 years, the number of publicly swopped companies has declined as firms backed by private equity have grown. In the U.S., about 87% of companies with annual receipts of more than $100 million are now private, according to the Partners Group, a Swiss-based global private equity outfit.
“So, how do we give 128 million Americans in the defined contribution system exposure to those asset classes?” asks Ed Murphy, CEO of Empower, the second-largest U.S. retirement services comrades, which administers 88,000 retirement plans.
Murphy, whose company serves 19 million individual investors, sustenances efforts to add private assets to retirement plans as part of a target-date fund, managed account or collective investment empower fund rather than a “stand-alone” investment.
“There’s a lot of good work being done in the industry on bringing this together in a way that chooses sense, and hopefully it gets employers comfortable,” he said.
Private equity comes with ‘greater risk’
Yet, for various plan sponsors to feel secure about investing in private assets, several challenges must be addressed, embracing high fees, transparency of the assets, liquidity risk and increased volatility.
“Private equity can pay higher returns than time-honoured public market investments, of course, with greater risk for retirement savers. This could offer an occasion for higher growth for their assets, but it would mean more exposure to volatility, which is probably not ideal for people nearing retirement,” answered Olivia Mitchell, a professor of business economics and public policy at the University of Pennsylvania and executive director of the Pension Scrutiny Council.
Employers offering 401(k) plans also must act as fiduciaries, meaning they are required to serve the crush interests of the plan participants, not themselves.
Plan sponsors are responsible for financial education, which some experts say may be disputing in explaining less-well-known investments.
“If they don’t understand what they’re buying, they shouldn’t be in it,” said Robert Burnette, a fiscal advisor and CEO of Outlook Financial Center in Troy, Ohio.
Employers have to select and monitor investment options, insure that fees are reasonable and provide participants with enough information to make informed decisions about their retirement savings.
Larry Fink, chief chief officer of BlackRock Inc., speaks during the 2025 National Retirement Summit in Washington, DC, US, on Wednesday, March 12, 2025.
Al Drago | Bloomberg | Getty Incarnations
Earlier this month, BlackRock completed its acquisition of Preqin, a provider of private market information. Fink try to says the company plans to build out its analytics to provide transparency and help investors understand risk in the private markets.
“If we could do that, we could then go to our regulators, whether it’s the [Be subject to of Labor] or the [Securities and Exchange Commission], depending on where we are trying to expand the investment opportunities and prove to them, let someone in on to them that these can be sensible instruments for a retirement product,” Fink said.
“Our job is to be providing a much better transparency and analytics to get that done,” he joined. “If we achieve that, then I think we’re going to have a credible opportunity to add these types of instruments to retirement works.”
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