Privates in 401(k)s are not what you think
August 21, 2025 by Ted Seides
Headlines have implied that the Executive Order opens the door for an immediate surge of 401(k) money into private equity. That’s not going to happen—the shift may come, but it will take years to move the needle.
Most 401(k) money is managed in Target Date funds, and most Target Date funds are low-fee, off-the-shelf solutions managed by a small group of providers (Vanguard, Fidelity, State Street, Blackrock, Capital Group, and T. Rowe Price).
Further, most companies have a CFO or head of HR selecting their Target Date offering. Their job carries risk (of litigation) with no reward (for generating excess returns). The set-up offers no incentive for them to switch from a solution that costs 3bp to another including privates that costs 50bp.
Early movers will be professionals who are already comfortable with alternatives. Private wealth managers who oversee 401(k) rollovers to IRAs and companies that manage custom plans with internal investment teams will begin incorporating privates. That said, the assets they manage are a small piece of the 401(k) pie.
Private market adoption in retirement plans may be a big deal down the road, but there’s no need to worry about a flood of capital hitting the private markets any time soon.
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