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Private-Equity Wants a Piece of Your 401(k)

yogibearbullyogibearbull
in Fund Discussions
Private-equity wants a slice of your 401k and it’s counting on some help from Trump Administration. The wrappers being considered are OEFs, CITs, interval-funds (IFs; buy anytime, but redemptions are limited). The TDFs can invest 5-10% in alternatives including private-equity/credit, but most plans don’t even do that fearing possible troubles with ERISA. High fees are another problem that may attract class action lawsuits. To address illiquidity, some firms have partnered with liquidity-providers. The 401k plans with brokerage windows shift all risks to the plan participants, but then why not just buy private-equity/credit giants APO, KKR, BX, BLK, etc.
https://www.barrons.com/articles/retirement-401k-private-equity-62be9228?refsec=mutual-funds&mod=topics_mutual-funds

Comments

  • WABACWABAC
    Just look at what private equity has done for the health care industry.
  • rforno
    Hard-pass.

    But they can't resist getting their grubby paws on the trillions in pensions/retirement accounts...
  • BaluBalu
    edited March 7
    There is greed and then there is fear (fear of not having enough for retirement) and both seem to motivate people to take similar risks.

    You know how defined benefit plans were phased out by companies (encouraging employees to get into 401(k) which helped the stock market) and now the last DB plan like is social security. If private equity and private credit wants to gain more market share, they really need to work on the US government phasing out social security, which should really motivate more people to get into private equity and private credit. Pure demand and supply.

    I would watch the Bigs (APO, KKR, BX, BLK (new), etc.)' for how and to what extent they bifurcate burdens from benefits using public markets which would give us an indication of the systemic risks they would create while the Fed and US government is focused on the last war culprits (banks).
  • a2z
    edited March 7
    this has been some time in the making, as institutions have self-capped allocation for a few years now. marketing is no longer restricted to hnw clients.

    lobbyists not needed, and will be faster\cheaper by giving trump & cronies their cut directly.
  • Observant1
    edited April 16
    Private equity (PE) investments don't belong within 401(k) plans.
    They are illiquid and difficult to properly value.
    Furthermore, PE is often riskier and considerably more expensive than public market investments.
    While some PE funds have generated excellent long-term results,
    there is wide dispersion between best-in-class funds and average funds.
  • WABACWABAC
    Saw this hilarious sale pitch at CNBC: https://www.cnbc.com/2025/03/08/ultrawealthy-to-retail-investors-expanding-access-to-private-credit.html

    Pull quote:
    BondBloxx’s Joanna Gallegos thinks it’s a great idea despite the asset class’ reputation for charging high fees and academic research that have shown sluggish returns. Her firm launched the BondBloxx Private Credit CLO ETF (PCMM) about three months ago.

    “We don’t believe in the velvet rope. We believe in connecting markets,” the firm’s co-founder and chief operating officer told CNBC’s “ETF Edge” this week. “People have not had access to it. It makes sense in a portfolio. People should have access to … a power tool like that in their portfolio.”
    Yet another Minsky Moment?
  • Observant1
    Ms. Gallegos is obviously talking her book!
  • Observant1
    Cliff Asness discusses the lack of mark-to-market valuations and its implications.

    https://www.institutionalinvestor.com/article/2bstqfcskz9o72ospzlds/opinion/why-does-private-equity-get-to-play-make-believe-with-prices
  • Sven
    Good comment from Asness.
    My criticism has been narrowly focused on PE’s lack of mark-to-market valuations and some of the implications this brings. The illiquidity and nonmarking were once implicitly acknowledged, appropriately, as a bug, but are now clearly sold as a feature. The problem is logically you get paid extra expected return for accepting a bug (possibly explaining some of PE’s historical success), but you pay by giving up expected return for being granted a feature. This is a potential problem going forward.
  • yogibearbullyogibearbull
    edited March 30
    Look, who is getting into private-equity? Vanguard
    (LinkedIn links are open - just close the Login/Signup screen)

    https://www.linkedin.com/posts/ericbalchunas_interesting-vanguard-held-discussions-with-activity-7311027525424431104-qiHw?utm_source=social_share_send&utm_medium=android_app&rcm=ACoAAFjCY6wBccxAhzfDGLCwSkfGL97DN413bHU&utm_campaign=copy_link
  • Sven
    @yogibb, what Vanguard stands to gain in PE? New products with some PE components?
    PE is generally offer to high net worth clients well in excess of $1M.
  • Sven
    edited April 1
    @yogibb, what Vanguard stands to gain in PE? New products with some PE components?
    PE is generally offer to high net worth clients well in excess of $1M. Not sure how it fits in 401(K) plan.
  • yogibearbullyogibearbull
    Key is the new CEO Salim Ramji.

    He came from BlackRock/BLK. Vanguard may want to be a low-cost disruptor in private-equity. Larry Fink/BLK wants to bring private-equity to the masses. Looks to be a dream combo.

    Not a sure thing. Remember that at one time, Vanguard wanted to be a low-cost disruptor in the annuities world, but it gave up only after a few years. And a few more years later, it dumped the entire variable-annuity business on Transamerica, retaining only the VA fund management.

    Ramji is now in India to review a new tech development center in India although it doesn't offer any funds within India.

    Critical for Vanguard will be to improve its customer service and quit the M-F 8-8 support operations. But we haven't seen any announcements for those.

    This may not be your grandfather's Vanguard, or even Bogle's Vanguard.
  • Observant1
    edited April 1
    Vanguard already partners with HarbourVest to offer private equity investing for its clients.
    Clients must have $5 million in Vanguard assets, in addition to meeting qualified purchaser
    and accredited investor regulatory standards¹.
    I assume Vanguard seeks a PE strategy accessible to a larger segment of the investor population.
    https://investor.vanguard.com/wealth-management/private-equity


    ¹ Clients must meet the qualified purchaser and accredited investor standards under federal law,
    typically showing that their net worth is over $1 million or their annual income has been more than
    $200,000 in the last two years.
  • yogibearbullyogibearbull
    From horse's mouth,

    Short 7+min Video
  • Observant1
    edited April 1
    @yogibearbull,

    Thanks for the video!
  • BaluBalu
    edited April 1
    Do they already have Private Credit offering, even as an allocation in an existing credit fund? How about equity Investments in start ups like what Fidelity does with some of Fidelity funds?

  • Observant1
    edited April 16
    The article doesn't provide many details and includes lots of "corporate speak."

    "Wellington Management ('Wellington'), Vanguard, and Blackstone (NYSE: BX) today announced
    a strategic alliance to transform how investors access institutional-caliber investment opportunities.
    The three firms will collaborate on developing simplified multi-asset investment solutions
    that seamlessly integrate public and private markets as well as active and index strategies."

    https://www.blackstone.com/news/press/wellington-vanguard-and-blackstone-to-collaborate-on-investment-solutions-combining-public-and-private-assets
  • a2z

    seems carlyle was the runner-up.
  • MarkMark
    P-E might have to settle for smaller pieces now that many of those former 401-k's are sitting at 301-k's or less.
  • rforno
    edited April 17
    Well as the great philosopher Jagger said, 'you can't always get what you want.'

    And in my case, they won't, because I don't trust government appointed investment committees and stashed it all in one American Fund.
  • yogibearbullyogibearbull
    FUNDS. There is a push by the fund trade association ICI to expand access to PRIVATE-MARKETS. Several firms are also pushing in this area. Private-market AUM now is $25 trillion vs $4 trillion in 2013. Many companies are remaining private for longer and several are unicorns already. Private-market remains the domain of institutions, pension funds and accredited-investors; access is through financial advisors. There are only a handful of listed funds, interval-funds and nontraded funds. But the fund industry wants retail customers. In particular, ICI wants the 15% cap on alternatives raised for retail CEFs, inclusion of some private-market options in 401k/403b, and other changes.
    https://ybbpersonalfinance.proboards.com/thread/810/weekly-business-digest-12-2025
  • Observant1
    edited 2:38AM
    Regarding ICI's stated desire to expand access to private markets,
    why do I get the feeling that retail customers would be left holding the bag?
  • rforno
    Observant1 said:

    Regarding ICI's stated desire to expand access to private markets,
    why do I get the feeling that retail customers would be left holding the bag?

    Because they will. (Again)
  • yogibearbullyogibearbull
    edited 10:40AM
    Read more about ICI viewpoint here, https://www.ici.org/news-release/25-private-markets-accessible

    ICI's argument is that private-equity markets are sufficiently developed now, so the regulators don't have to put gates that practically allow only institutions and wealthy to participate.

    If you are a holder of Fido or other active growth funds, your fund likely has exposure to Private-equity.

    So, the question is, should the gates be removed or just lowered for retail investors?
  • a2z

    i would say there are legitimate functions for PE and especially PC as governments seem unwilling and unable to singly handle neither the number nor size of 'critical' projects where economic demand is plausible.
    and so this is an avenue for smaller investors to participate, be they so inclined.

    however, the warning flags are plenty :
    - every looser-regulated financial niche attracts more than its fair share of crooks.
    - would alt managers be pushing this hard without the ceiling stop in institutional flows?
    - we are in the golden age of grift with crypto and purchasing of public office...so this is seen as mild in comparison.
  • rforno
    yogibearbull said:


    So, the question is, should the gates be removed or just lowered for retail investors?

    I have no problem with lowering/removing the gates to retail investors* but DO have a concern with PE infecting pension/retirement accounts in ways that might not offer investors any recourse. My sense is that this is just the latest case of Wall Street whizkids salivating at the chance to get their claws on the trillions in assets locked up in retirement accounts.

    * hell folks can buy crypto or 0DTE options to play with, so why not speculate in PE? Information is much more available now than in the 1960-2010s.
  • yogibearbullyogibearbull
    edited 6:29PM
    @rforno, yes, investors can buy options, cryptos and use margin. IMO, these are much more risky than private-equity/credit.

    So, there is the issue of abuse in selling them. That can be handled by lowing the gates or requiring that the investors be sophisticated enough to use options and margin. Beyond that, investors don't need babysitting by SEC or FINRA.

    FWIW, I have owned TIAA Real Estate Account VA (QREARX) for quite a while and it's private real estate. But its liquidity model is quite different than that for nontraded Blackstone BReit or Starwood SReit.
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