“I don’t want to belong to any club that will accept me as a member.” Groucho Marx’s classic quip might feel a little too real if you’ve heard the latest buzz about private equity eyeing your 401(k). Yes, the high-flying world of leveraged buyouts and billion-dollar deals is angling for a seat at your retirement table—and the story behind it is more than just finance jargon.
Here’s the lowdown: Private equity firms—think Blackstone, Apollo, KKR—are lobbying hard for a Trump administration executive order that could open the $9 trillion U.S. retirement market to their investments. The Department of Labor, Treasury, and SEC are already weighing how to integrate these private funds into mainstream retirement plans, and some big players aren’t waiting for the ink to dry. Empower, the second-largest 401(k) provider, has teamed up with Apollo, Goldman Sachs, and others to offer private market investments through collective investment trusts, making private equity more accessible than ever before Empower’s new partnerships.
Proponents say this is about “democratizing” access to high-return assets. “Empower is making a profound move on behalf of American retirement investors who should have the ability to invest in an asset class that has the potential to diversify their portfolios and offer opportunities for returns in new ways,” says Empower CEO Edmund F. Murphy III Empower CEO’s statement. Sounds great, right? But there’s a catch—actually, several.
First up: Fees and performance. Private equity is notorious for its high management fees, which can gobble up a chunk of your returns. And while the industry likes to tout its stellar track record, the reality is more complicated. Recent analyses show that over the past one, three, five, and ten years, the S&P 500 outperformed private equity funds S&P 500 vs. private equity returns. Eileen Appelbaum, co-director of the Center for Economic and Policy Research, puts it bluntly: “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.” She adds, “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.”
Now, let’s talk about the leveraged buyout model. When private equity firms buy a company, they often saddle it with debt to finance the purchase. That debt doesn’t sit on the private equity firm’s books—it weighs down the company itself. The fallout? Higher bankruptcy rates, layoffs, and service cutbacks. Of the ten largest corporate bankruptcies in early 2025, seven were private equity-owned, including household names like Forever 21 and Joann Fabrics bankruptcy statistics. For employees and consumers, that can mean fewer jobs, higher prices, and even riskier healthcare when private equity owns hospitals.
The push to bring private equity into 401(k)s isn’t happening in a vacuum. Republican-led lobbying and Trump-era orders have already loosened the rules, making it easier for these investments to be labeled “prudent” for retirement savers. The Biden administration tried to pump the brakes, urging caution, but with the regulatory pendulum swinging back, the door is wide open for private equity’s next act regulatory shifts.
What about the argument that private equity has outperformed public markets over the long haul? It’s true that some studies, especially those tracking state pension allocations, show private equity earning a net-of-fee annualized return of 11% over the past 23 years—beating public stocks by 4.8% long-term private equity returns. But those numbers come with caveats: state pensions have access to top-tier funds, professional oversight, and the ability to weather illiquidity. For everyday savers, the risks—high fees, lack of transparency, and long lock-up periods—are much more daunting Chicago Booth’s analysis.
ERISA, the law that governs retirement plans, puts the onus on employers to act as fiduciaries—meaning they must act in the best interests of plan participants. With private equity’s complexity, illiquidity, and opaque valuations, plan sponsors face heightened risks. As Bradley Fay, an ERISA attorney, notes, “It is important that plan sponsors make sure a plan’s investment policy statement appropriately reflects how they will address private assets” fiduciary responsibilities. If things go sideways, lawsuits are likely.
For those who want to see private equity in their 401(k), experts suggest keeping allocations small, using diversified target-date funds, and demanding clear, plain-English disclosures about fees and risks ERISA compliance tips. Education is key, especially since most plan participants aren’t financial pros.
Private equity in 401(k)s is shaping up to be one of the hottest—and most controversial—retirement trends of 2025. As the debate heats up, the most important thing for working Americans is to stay informed, ask questions, and remember: not every club is worth joining, especially when your retirement is on the line.
