Private Markets for the Masses: Private Equity Comes for Your 401(k)
The Million Dollar Question: On Apollo’s Q4 2025 earnings call, CEO Marc Rowan claimed that adding private assets to a 401(k) portfolio over an employee’s investing lifetime produces how much of a better outcome than a standard stock-and-bond portfolio?
A) 10-20% better B) 25-50% better C) 50-100% better D) 200%+ betterRead on for the answer.
For most of the last four decades, private equity was something you needed a pension fund, an endowment, or tens of millions of dollars to access. That barrier is coming down — not because private equity suddenly wants ordinary savers to do better, but because a 2025 executive order, a stalled-but-moving Department of Labor rule, and a Supreme Court case are converging to open America’s $10.1 trillion 401(k) system to an asset class that its own longtime institutional clients are quietly walking away from.
What it is
“Democratizing private markets” is the industry’s own phrase for moving private equity, private credit, and other historically institutional-only investments into vehicles that ordinary retirement savers and retail investors can hold. The push accelerated on August 7, 2025, when President Trump signed Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” directing the Department of Labor and SEC to reduce regulatory barriers to including private equity, private credit, real estate, and digital assets in 401(k) and other defined-contribution plans. Within a week, the DOL rescinded a 2021 supplemental letter that had discouraged plan sponsors from offering private equity at all.
The follow-through has been slower than the announcement. The DOL’s 180-day review produced a proposed rule on March 30-31, 2026 — a process-based “safe harbor” meant to protect plan fiduciaries who add alternative investments from the kind of lawsuits that have already produced more than $1 billion in settlements since 2016. It is still a proposal, not a final rule. And on January 16, 2026, the Supreme Court agreed to hear Anderson v. Intel Corp. Investment Policy Committee, the case that will decide how much legal exposure a plan sponsor takes on by including illiquid, high-fee alternatives in a 401(k) menu in the first place. Until that case and rule resolve, most plan sponsors have real incentives to stay cautious.
Who uses it
At the institutional end, this is old news: U.S. public pension funds allocate an average of 14% of their portfolios to private equity, and family offices and other UHNW investors often run considerably higher. What’s new is the retail on-ramp being built underneath the $100M+ and pension-fund tiers.
Empower, the country’s second-largest retirement-plan recordkeeper, launched a private-markets program in May 2025 with Apollo, Partners Group, Goldman Sachs, Franklin Templeton, Neuberger Berman, PIMCO, Sagard, and NorthLeaf as initial partners; Blackstone joined in January 2026. Separately, Wellington Management, Vanguard, and Blackstone announced a strategic alliance in April 2025 whose first products — closed-end funds blending public and private holdings — launched exclusively through Merrill and Bank of America Private Bank, with the firms confirming they are jointly developing “retirement-specific solutions” for the workplace market.
Meanwhile, the $1M-$30M and $30M-$100M+ wealth bands that already had access are, if anything, growing more enthusiastic on paper: Hamilton Lane’s 2026 Global Private Wealth Survey found 86% of private-wealth advisors plan to increase private-market allocations this year, and 83% see the risk/reward as equal to or better than public markets. At the very largest institutional scale, the opposite is happening. Public pension systems in Alaska, Maine, Washington State, Texas, Ohio, Nevada, and Oregon have all trimmed their private-equity targets over the past two years, citing weak recent returns, illiquidity, and a market described by the Alaska Permanent Fund’s own investment staff as past its “golden era.”
Why they use it
The pitch to retirement savers is diversification: exposure to companies that are staying private longer, smoother-looking returns than the daily swings of the stock market, and a shot at the illiquidity premium that has historically rewarded long-term capital. Apollo CEO Marc Rowan made the boldest version of that case on the company’s Q4 2025 earnings call, arguing that adding private assets to a 401(k) given the decades employees will hold them “are 50% to 100% better outcomes.”
The less-marketed reason is simpler: private equity needs new money, and its old customers are pulling back. Global PE fundraising from institutions fell 11% in 2025, the fourth consecutive annual decline and the lowest total in a decade, while the industry sits on a reported $3 trillion backlog of aging, unsold portfolio companies. A $10.1 trillion 401(k) system — inside a $49.1 trillion total U.S. retirement pool — is, by a wide margin, the largest pool of long-duration capital the industry hasn’t fully tapped yet.
How it works
Almost none of this arrives as a plain line item labeled “private equity” on a 401(k) menu, and that’s deliberate. Empower’s structure routes private-market exposure through collective investment trusts held inside advice-based managed accounts rather than a raw fund choice — a design meant to keep the plan sponsor one step removed from the fiduciary risk of picking a specific illiquid fund. State Street has gone further, building Apollo’s Apollo Aligned Alternatives fund directly into its target-date default strategies, meaning a saver defaulted into that target-date fund can end up holding private-credit exposure without ever actively choosing it.
The underlying vehicles are usually “evergreen” or interval funds: unlike a mutual fund or ETF, they don’t offer daily liquidity. Investors can typically only redeem shares during periodic tender windows, often capped as a percentage of fund assets, and the fund’s price — its net asset value — is set quarterly by the manager’s own internal marks rather than a market-clearing trade. The SEC raised exactly this concern in early 2025 about State Street and Apollo’s PRIV ETF, an unusual attempt to wrap private credit inside a normally-liquid, daily-traded ETF structure using an Apollo liquidity backstop with an undefined daily limit — the kind of structure regulators worried could leave the fund holding mostly illiquid assets if redemptions ever spiked at once.
What it costs
The clearest evidence on cost and performance comes from the Private Equity Stakeholder Project’s review of the 15 largest PE-focused evergreen funds marketed to retail and retirement investors, published in January 2026 and updated the following month. In 2025, those 15 funds generated a median return of 11.97% — about half the S&P 500’s 17.43% and well behind the MSCI ACWI’s 22.34% — while carrying a median expense ratio of 3.76%, not counting sales charges. A Vanguard S&P 500 index fund, which beat nearly every fund in the group, charges 0.03%.
Individual examples make the gap concrete. Apollo’s own $25 billion Apollo Aligned Alternatives fund — the same fund State Street has embedded in its target-date strategies — returned 8.1% in 2025 against an estimated total annual cost of 3.54%. The Pomona Investment Fund returned 5.63% while charging a 3.93% expense ratio. Ares Management’s Ares Private Markets Fund returned 12.44% before its 5.14% expense ratio, and after its maximum 3.5% upfront sales charge, the net 2025 return for a new investor dropped to 8.50%. In bracket terms: at the $1M-$5M level, a saver paying these fees on even a modest six-figure allocation is handing over thousands of dollars a year for access to an asset class that, on this evidence, underperformed the cheapest index fund on the market.
Hidden costs and tradeoffs
The fee-and-return gap is the most visible cost, but the structural ones matter more over time. Illiquidity is the central tradeoff: an interval fund’s redemption gates mean a saver can’t necessarily get money out on demand, which is a real constraint if it happens during a downturn — and private credit specifically is described by industry outlooks as facing “its first big test” heading into 2026 after several years of rapid, largely untested growth.
Self-marked valuations compound the problem: because a private fund’s price comes from the manager’s own quarterly estimate rather than a market trade, savers get a false sense of stability — no daily volatility to worry about — right up until a redemption event or a bad marking cycle reveals the gap between the stated NAV and what the underlying assets are actually worth. And there’s a genuine conflict-of-interest question in structures like State Street’s target-date default: the same institutions selecting and marketing these products can also be the ones deciding, by default, which savers end up holding them.
Perhaps the starkest tradeoff is the one institutional allocators are voting on with their own money. As retail savers are invited into private equity, the Alaska Permanent Fund, Maine Public Employees Retirement System, Washington State Investment Board, Texas Teachers, Ohio Public Employees Retirement System, and Nevada Public Employees Retirement System have all cut their private-equity targets over the past two years, several citing deteriorating expected returns and illiquidity risk. Academic reviews from the Center for Retirement Research at Boston College and a Johns Hopkins-affiliated study reported by PlanAdviser have separately concluded the asset class, as currently structured, is a poor fit for defined-contribution plans.
What people get wrong
The most common mistake is assuming this is already broadly live inside an ordinary 401(k) menu today. It mostly isn’t. The DOL’s safe-harbor rule is still a proposal, not a final regulation, and the Supreme Court hasn’t yet ruled in Anderson v. Intel on how much fiduciary exposure a sponsor takes on by including these funds. What has actually launched — Empower’s managed-account CIT program, the Wellington/Vanguard/Blackstone alliance’s Merrill-only funds — reaches a narrower slice of savers, often only those already working with a financial advisor, not a default menu choice available to all 70 million 401(k) participants.
The second mistake is treating “institutional-style access” as a guarantee of institutional-style returns. Institutions historically earned a real illiquidity premium over decades of disciplined access, negotiated fees, and co-investment rights that retail evergreen-fund investors simply don’t get. The 2025 performance data shows the opposite of a premium: retail-facing PE funds trailed public indexes by a wide margin while charging more than 100 times the fee of a comparable index fund.
The third, subtler mistake is missing the opt-out-not-opt-in mechanics. A saver defaulted into a target-date fund that has quietly incorporated a private-credit sleeve is holding this exposure by default, not by an active decision they can point to and reconsider — which is a meaningfully different risk than a saver who deliberately allocates a slice of a self-directed account to an alternative fund.
Bottom line
The answer is C: Marc Rowan told investors adding private assets to a 401(k) would deliver “50% to 100% better outcomes.” Measured against his own company’s flagship retail fund — an 8.1% return in 2025 against a 3.54% cost, in a year the S&P 500 returned 17.43% — that claim does not hold up on the numbers Apollo itself has published. The wealth-level distinction matters here more than almost anywhere else on this site: at the family-office and $100M+ tier, negotiated fees, real due diligence, and multi-decade time horizons can make private-market illiquidity a defensible trade. At the level of an ordinary 401(k) participant paying retail fees with no negotiating leverage, arriving into an asset class its own longtime institutional buyers are quietly exiting, the arithmetic the industry itself has published does not yet support the pitch it is making.
Related reading: The Private Credit Trap covers the same asset class from the family-office demand side. “Could This Stock Make You a Millionaire?” is the closest piece in tone — a skeptical teardown of a wealth-building pitch aimed at ordinary savers. Borrowing Against Wealth is a companion case study in a wealth-management tool moving from UHNW use down toward the mass market. Hedge Funds and Private Equity explains how the asset class actually functions at the institutional level this piece contrasts it with. Money Management is the anchor piece on where family offices and wealth managers sit relative to products like this one.
