Private Equity Could Supercharge Retirement Savings, New Study Finds
Private equity could add more than $170,000 to a retirement saver’s nest egg over a 40-year investment horizon, according to a new study from the CFA Institute, adding fresh fuel to the debate over whether private markets belong in Americans’ 401(k)s.
A target-date fund with a 10% allocation to private equity produced an average projected retirement balance of $1.489 million, compared with $1.316 million for a portfolio invested in public stocks and bonds. That works out to roughly $173,000, or 13%, more retirement wealth in the CFA Institute’s model, according to the study released Monday.
The findings arrive as the U.S. retirement system is moving toward greater access to private assets. The Department of Labor proposed rules in March aimed at making it easier for 401(k) fiduciaries to consider alternative investments, including private equity and private credit, while providing a process-based safe harbor around investment selection.
U.S. Sen. Elizabeth Warren (D-Mass.), a vocal critic of both Trump and the crypto sector, has previously argued against the proposed rule.
As “cracks emerge in the private credit market, private equity returns fall to 16-year lows, and crypto keeps tumbling, President Trump has decided now is the time to stick all of these risky assets into Americans’ 401(k)s," Warren said back in March.
"Americans facing an uncertain future in Trump’s economy will now have more reasons to question the security of their retirement savings — all so that Trump’s Wall Street buddies have another pile of cash to play with. Anyone who cares about the financial security of working people should oppose this proposed rule," she continued.
Private markets remain a tiny portion of defined-contribution retirement assets. Less than 1% of the roughly $14 trillion U.S. defined-contribution system was invested in private markets as of 2023, according to the Bipartisan Policy Center.
The CFA Institute study suggests that gap could represent an opportunity — but not necessarily a case for simply dropping private equity into every retirement account.
Private Equity Stands Out
The researchers modeled a hypothetical target-date fund over a 40-year accumulation period, with regular contributions and allocations shifting over time as the investor approaches retirement.
Of the private-market strategies examined, private equity and venture capital were the two that increased average projected retirement wealth relative to a traditional portfolio of public equities and bonds. Private equity produced the highest average ending balance in the study’s main simulations.
Other private assets played a different role. Private debt, infrastructure and real estate generally produced lower average ending balances than the public-market baseline, but they also reduced the volatility of projected retirement outcomes. The researchers found that combining growth-oriented assets with those more defensive private-market investments could change the risk profile of a retirement portfolio.
The study also found that contribution levels and investment time horizons can matter as much as, or more than, the allocation to private markets.
For private-equity firms, the stakes extend far beyond portfolio construction. Even a modest allocation across the massive U.S. defined-contribution market could create a significant new source of long-term capital for an industry that has traditionally relied on institutional investors such as pensions, endowments and sovereign wealth funds.
The CFA Institute study suggests retirement accounts could become an increasingly important frontier for private markets — if plan sponsors and regulators can overcome the liquidity, valuation and fee challenges that have kept the asset class largely outside 401(k)s.
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