Private Equity Is Coming for Your 401(k)

Private equity often gets a bad rap because many people don’t realize just how much capital it controls. It’s a $13-trillion industry that funnels money throughout the economy, often in under-the-radar ways. For example, a private equity firm might be your neighbor’s landlord or be responsible for that overpriced footlong sandwich you ate at Jersey Mike’s last week.

Now, the industry has its eyes on your retirement account — and the collective $12 trillion Americans have invested in defined contribution plans like the 401(k).

Investing in private equity is becoming more common with time, and with the incoming administration, more deregulation could be on the way. But don't get too excited that you might get access to these funds in the near future. They’re not necessarily a better option for your 401(k) allocations than your current strategy.

From 2025 to 2030, the compound annual growth rate (CAGR) for private equity is forecast to be 10%, which underperforms most major forecasts for the S&P 500 in 2025. JPMorgan and Morgan Stanley, for example, see growth of 10.11% this year, while Bank of America sees growth of 12.92%. And while hindsight is 20-20, looking at the major indices’ performances since 2000 provides some context. Over that period:

• The Dow Jones’ CAGR is 10.67%
• The S&P 500’s CAGR is 11.84%
• The Nasdaq-100’s CAGR is 20.66%

So when it comes to retirement savings, it’s important to find the appropriate balance between safety and growth. And just because a shiny new toy once reserved for the rich and famous may soon be available to everyday Americans doesn’t mean they should be jumping at the opportunity. 

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