DAILY TRIFECTA: Private Equity Is Circling Your 401k
They're hungry like the wolves of Wall Street
THE SET-UP: There was a time when hardworking Americans enjoyed something called “a defined benefit” retirement plan. If you’re unfamiliar with a “defined benefit plan,” that’s understandable. Plans like that are a dying breed. Here’s how Investopedia describes it:
A defined-benefit plan is an employer-sponsored benefit for retired employees, with a lump-sum payment or a series of payments awarded after retirement based on the employee's salary and length of service, among other factors.
Once commonly known as a “pension,” it is been largely replaced by the “defined contribution plan.” See what they did there? Switched out “benefit” for “contribution.” Here’s Investopedia again:
A defined contribution (DC) plan is a retirement savings plan where employees contribute a fixed amount or percentage of their pay that grows tax-deferred until retirement … such as a 401(k) plan or a 403(b).
Nowadays we’re all familiar with 401ks, but, as strange as it seems, there was a time when most employees expected a pension. By the end of the 70s “more than 80 percent of employees in medium and large private establishments were covered by traditional pension plans.”
But then the 80s happened. Milton Friedman-style neoliberalism was all the rage as deregulation and indebtedness swept through the land. Capital pooled on the supply side of the economy and companies launched into a bevy of leveraged buyouts. Greed was good and investors became corporate raiders, buying and dismantling companies for fun and profit. When they did, pensions were among the assets they sought to raid and, ultimately, the liabilities they hoped to escape.
Phillip Mattera described the spread of the Supply Side zeitgeist for the Corporate Research Project in 2003:
Companies no longer looked at pension funds as employee nest eggs that they were charged with protecting. Now they were seen as sources of “excess assets” that could be put to very different uses -- if the plans were shut down. During the 1980s, hundreds of companies took the audacious step of terminating pension plans and using the captured assets for purposes such as financing leveraged buyouts by Top managers. Corporate raiders also got into the act. For example, when Ronald Perelman took over cosmetics maker Revlon in the mid-1980s, he gained control of $100 million in pension fund assets. Overall, more than $20 billion in pension assets were captured before Congress put an end to the practice by imposing a heavy tax on pension piracy
That “heavy tax” came too late for millions of American workers. Once the Supply Siders dipped their beaks into a massive nest egg that was just sitting there … their hunger became insatiable. What was all the money doing, anyway? That is, besides providing security to two generations of Americans who wouldn’t have to eventually depend on Social Security to survive? Other than that, the money was “idle.” And Wall Street was hungry like a pack of wolves…
In fact, the amount of money accumulating in employer pension plans -- which surpassed $1 trillion in 1983 for private and public employers combined -- came to represent one of the largest pools of capital in the country, much of which was invested in the securities of large corporations.
Wall Street’s wolves have been on the prowl ever since. In fact, they still are … check out the opening paragraph from the first entry in today’s TRIFECTA:
With private equity firms facing one of the toughest fundraising environments in more than a decade, many are hoping to crack open a large pot of capital that has remained largely out of reach: the trillions sitting in Americans’ retirement plans.
So, just like corporate raiders in the 80s coveted the wealth working Americans accumulated in their defined benefit plans … private equity is now eyeing the already far-less secure wealth they’ve accumulated thanks to an inflated stock market:
Assets in US defined contribution plans reached $12.4 trillion in the fourth quarter of 2024, up from $11.1 trillion in 2023 and $9.6 trillion in 2022, according to data from the Investment Company Institute, an association representing the asset management industry in service of individual investors. Of this, $8.9 trillion was held in 401(k) plans in Q4 2024.
BTW, it’s no coincidence that 401ks took off in the 90s, when the Tech Bubble sucked employees’ “contributions” into the “go-go” market during the second Clinton Administration. That was the beginning of day trading and people pored over mutual funds, jazzed by their growing “contributions.” Then the bubble popped. And so did many retirement plans. And that’s what defines the 401k … you can contribute all you want, but there is no guarantee of a benefit when retirement comes. That’s if you get a 401k. Many don’t even get that … and still, the Supply Siders want to “privatize” Social Security. After all, that’s a helluva lot of capital … and it is just sitting there … waiting to be turned into a private equity roll-up of car washes. What could go wrong? - jp
TITLE: Tapping the trillions: Private equity's 401(k) ambitions
https://www.privateequityinternational.com/tapping-the-trillions-private-equitys-401k-ambitions/
EXCERPTS: PE managers have long sought to tap retirement money, especially in the DC space. Unlike DB plans, which are managed by investment professionals and already significantly exposed to private assets, DC plans are largely participant-directed and have remained mostly invested in public markets.
Among the various types of DC plans, 401(k)s hold the largest share of assets, making them the primary target for private equity’s push into the retirement space.
In recent earnings calls, some listed PE firms – including Blackstone, Apollo Global Management and KKR – have outlined plans to attract capital through American workers’ 401(k) accounts. Some have hired dedicated executives to spearhead their push into the DC space or started partnering with sponsors of target-date funds (TDFs) – the most common investment option in 401(k) plans, designed to automatically adjust asset allocation as participants near retirement.
“Everywhere in the world where privates – and I’m going to use the word ‘private’, not ‘alternative’ – have been added to retirement solutions, the results are not just a little bit better: they are 50-100 percent better,” Marc Rowan, chief executive at Apollo, said in the firm’s Q4 2024 earnings call.
He added that allowing US individual investors to invest in private markets within their 401(k) savings would mark the next major innovation in retirement investing.
The enthusiasm has been mutual. On the receiving end of retirement products, a majority of Americans appear open to private market investments: according to a January survey by non-profit research group Pinpoint Policy Institute, 57 percent of registered voters support reforming regulations to make it easier for workers to invest in private equity through their 401(k) plans, compared with just 13 percent who oppose and 30 percent who are unsure.
“The idea that you can democratise some of these investment options was appealing, particularly when you let folks know some of these options of investments are typically reserved for accredited investors [and] wealthy institutions,” Gordon Gray, executive director of Pinpoint, tells Private Equity International. “I think that resonated with people.”
However, despite the growing appetite from both private equity managers and retirement savers, integrating PE into the 401(k) system won’t be an easy task. Most activity so far has been limited to a handful of pilot programmes, with one consultant describing actual PE adoption in DC plans as “very slow”.
While a growing number of PE firms are targeting retirement money in the US, the adoption of private market products in the participant-directed DC universe is still limited, according to Ted Benedict, managing principal and consultant at Meketa.
“I’ve seen and evaluated some of the products, but the adoption within the defined contribution space has been very slow,” Benedict tells PEI. “The one asset class on the private side that has seen some adoption is core private real estate. [As for] private equity and private credit, I have not seen broad adoption, in my experience.”
Despite the challenges, market participants – even those not directly involved in PE’s push into Americans’ retirement savings – are optimistic about the prospects of such efforts.
“It’s going to provide more capital for exits and fundraising. And even though it will be the larger firms aggregating [the capital] initially, it will be positive for the overall industry,” says Brooks Harrington, chief investment officer of private equity at Federated Hermes,. “But it’s also important to remember that these products are going to be a little different than how private equity has traditionally positioned itself… so you’ve got to be mindful of any new product and how it’s going to affect the market if you are going to invest alongside [these vehicles].”
TITLE: Empower Responds to Warren, Defends Private Assets in 401(k)s
https://401kspecialistmag.com/empower-defends-private-markets-in-401ks-move-in-response-to-warren-letter/
EXCERPTS: In its response Monday to an inquiry from Sen. Elizabeth Warren (D-MA) regarding its plans for the inclusion of private market investments in defined contribution retirement plans, Empower emphasized the importance of evolving the retirement system to offer carefully regulated access to private equity, credit, and real estate investments for everyday savers.
“The retirement landscape is changing, and it’s clear that limiting access to private markets in defined contribution plans no longer serves the best interests of American workers,” said Edmund F. Murphy III, President and CEO of Empower, in a media statement released today. “To deliver stronger, more diversified retirement outcomes, we must thoughtfully remove these barriers. Empower is committed to leading this evolution with the necessary safeguards and fiduciary rigor to protect and advance the interests of millions of savers.”
In its response letter to Warren, Empower noted the U.S. has seen a nearly 50% decline in the number of publicly listed companies since the 1990s. Meanwhile, the global private equity market has grown to over $13 trillion, capturing the majority of early-stage growth that everyday investors increasingly cannot access through traditional retirement plans.
Empower’s response said this isn’t because of their ability to understand risk or plan responsibly, but because access has historically been limited to institutional investors and the wealthy.
“It’s time to change that. Empower believes in the democratization of private investing,” Empower’s response from Murphy said.
Empower’s own research, conducted in June 2025, reveals strong support from American workers for access to private markets in their 401(k) plans:
79% believe retail investors should have access to the same investment products as institutions.
76% want their employers or 401(k) providers to offer modern investment options.
72% believe private market exposure could improve long-term retirement outcomes.
73% say it would help level the playing field for everyday investors.
“These findings underscore a significant trend: Americans want more diversified tools to build long-term wealth in a market environment where the number of public investing opportunities has declined,” the response letter states. “As public markets investing has undergone this structural change, it is our duty to adapt our offerings and provide our customers with new means of investing.”
Empower’s May 14 announcement that the industry’s second-largest recordkeeper serving more than 19 million Americans will offer private markets investments to retirement plans triggered the letter from Warren, ranking member of the Senate Banking Committee, which was sent on June 18 and requested a response from Empower by July 7.
“Given the sector’s weak investor protections, its lack of transparency, expensive management fees, and unsubstantiated claims of high returns, we are seeking information on how your company will ensure the safety of the billions of dollars of retirement savings it safeguards as it implements this program,” Warren wrote in the letter.
“Pensions’ investments in private equity have been dubbed a ‘Wall Street time bomb.’ Even institutional investors admit their uncertainty as to whether private equity’s ‘very thin outperformance is worth the risk of opaque and illiquid investments whose actual value is often impossible to determine—investments that could crater when the money is most needed,’” the letter continued.
TITLE: Private equity wants to get into your 401(k). Trump might let them.
https://www.msnbc.com/opinion/msnbc-opinion/private-equity-401k-retirement-trump-administration-rcna215601
EXCERPTS: The private equity industry boomed following the 2008 financial crisis, when consistently low interest rates facilitated mergers and acquisitions. While the industry blamed then-Federal Trade Commission Chair Lina Khan and the Biden administration’s tougher antitrust enforcement for the end of the M&A boom, the real culprit was the return of high interest rates and private equity shops overvaluing their holdings. Unable to sell many of their holdings at the price they would like, and short of traditional institutional investors in their funds, where can private equity turn? I’m afraid that this is where you enter the picture.
The industry has every reason to expect help from this White House. Republicans in Congress have already placed a provision in Trump’s big, beautiful budget bill that would increase the tax break for interest payments on the leveraged buyouts that private equity loves. And toward the end of Trump’s first term, his administration loosened regulations surrounding 401(k) accounts, agreeing with industry lobbyists that the arena met the standard of a “prudent” investment for retirement savers.
To be clear, in the view of many, it is not. The Biden administration, for instance, backtracked on much of the previous Trump-era guidance. And employers, who are considered fiduciaries for worker retirement accounts and can find themselves in court battling their former employees if things don’t work out, didn’t exactly race in to offer up private equity offerings in 401(k) accounts.
Champions of private equity claim that with promising startups and other companies less likely to go public than in the past, private equity could give mom-and-pop savers access to greater diversity in their portfolios as well as the possibility of higher returns.
The reality is different. The industry is famously opaque, and its high fees cannibalize much of the gains. “PE funds may look good on paper since they place a high value on their unsold companies, but this is not money that investors can take to the bank,” says Eileen Appelbaum, the co-director of the Center for Economic and Policy Research. “Since mid-2022, the companies in private equity portfolios have been overvalued, and PE funds have been unable to sell them at the price they are demanding.”
The result is a poor investment — except for the fat cats collecting management fees on it, that is. A recent analysis found that the S&P 500 returned better results than private equity over a one-, three-, five-, and 10-year period. Multiple other studies have yielded similar results.
Compounding this: The private equity model can be horrible for consumers and employees of the companies acquired and owned in this fashion. That’s because the debt to acquire the company isn’t the responsibility of the private equity firms, their partners or principals. It is, instead, a dead weight on the books of the company unfortunate enough to be purchased in this way, often leading to service and staff cutbacks, price increases and selling off companies piecemeal.
Private equity-controlled companies are more likely to declare bankruptcy than those with different ownership structures, and those filings are hovering at record rates. Of the 10 largest corporate bankruptcies in the first quarter of 2025, seven companies were owned by private equity. Think Forever 21. Think Joann, the fabrics and crafts chain. Think Prospect Medical Holdings, which owns more than dozen hospitals. In fact, health care companies controlled by private equity charge higher prices, yet their patients have higher rates of accidents, complications and deaths.
In other words, private equity all too often acts as an economic scavenger and parasite. The efficiencies of scale the industry claims it can find can literally be deadly. And for what? To make some fabulously wealthy members of the investment class even wealthier?