How Private Markets Could Help Shape the Future of Retirement Saving
In a Nutshell
Private markets can deliver higher returns and lower downside risk than public equities during market drawdowns, yet 401(k) participants have essentially zero access while pensions allocate ~30 %. Adding a modest 15–25 % private-market sleeve to long-term retirement portfolios therefore improves resilience and compounds wealth without replacing public stocks and bonds. The central goal is to give defined-contribution savers the same tools available to professional pension plans, leveling the playing field for better retirement outcomes.
These notes were generated by AI and may contain inaccuracies.
Private markets automatically mean riskier. If you look at the last 29 equity market drawdowns, you've actually seen private equity outperform public equity in 27 of them. Starting early, being consistent, and letting that capital grow for you over time is the key principle. This entire conversation about private markets in DC and 401k plans is about leveling the playing field.
Fifty years ago, most U.S. workers had the benefit of a pension fund where their employer and a professional investment team managed that portfolio and guaranteed them a level of income into their retirement years. The system has shifted where now most workers in the U.S. don't have a pension anymore. They only have access for retirement to a 401k plan or another form of defined contribution plan, where their employer helps them put dollars into a pool of savings, but they're then responsible for deciding what to do with those savings and making sure that they have enough savings into their retirement years.
If most people are saving through a 401k, they should have access to a broader investment toolkit. If you look at a pension fund today, on average, they allocate about 30% to private markets. On the other hand, if you look at a retiree who only has a 401k plan or defined contribution plan, they allocate typically 0% to a private market. This disparity is driving the conversation around private markets.
Private markets automatically mean riskier is not a fair assessment. Private markets not only create the potential for higher returns, but they've also been shown to reduce the risk in portfolios. If you look at the last 29 equity market drawdowns, you've actually seen private equity outperform public equity in 27 of them.
Private markets aren't necessarily riskier, and the goal is not to replace public stocks and bonds, but to actually be a complement in an investment portfolio. Private markets are an amazing complement. They can make a public market portfolio much more resilient and much better able to perform through a variety of market conditions.
Private markets do come with higher fees than public markets. What gets lost in the fee conversation is what is the return that's being generated for the investor net of fees. Even with the additional expense of generating the return, the return from private markets is still incredibly additive to portfolios.
Retirement savings is long-term savings. This is not meant to be a checking account. Private markets really have a 15, 20, 25% allocation of a largely liquid portfolio. Planning for retirement, you do have to have that long-term investor mindset. Starting early, being consistent, and letting that capital grow for you over time.
The ability to compound wealth over time is the fundamental mechanism at work. Starting early, being consistent, and letting that capital grow for you over time enables this compounding effect.
This entire conversation about private markets in DC and 401k plans is about leveling the playing field and helping people get access to solutions that can help them build better retirements.
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