Private Markets in Retirement Plans

The report does the following:

• Compares private market asset classes by examining how modeled allocations to private equity, private debt, infrastructure, real estate, and venture capital affect long-term defined contribution plan outcomes
• Shows how each asset class plays a different role, finding that private equity shows the highest end accumulation values, while private debt, infrastructure, and real estate generally reduce volatility in end accumulation values
• Tests allocation and plan-design choices by assessing how the size of private market allocations, portfolios with multiple private market allocations, accumulation periods, and equity-to-bond glide paths change modeled outcomes
• Places performance in a fiduciary context by considering modeled investment benefits alongside fees, liquidity, valuation, governance, participant protection, and the operational demands of incorporating private assets into retirement plans

Defined contribution (DC) plans have shifted investment and longevity risk from employers to individual retirement savers. As policymakers and plan providers consider expanding access to private markets, fiduciaries must determine whether these assets can improve retirement outcomes without introducing costs and risks that participants may not fully understand or be able to bear.

“Private Markets in Retirement Plans: Returns, Risks, and the Importance of Plan Design”examines how five private market asset classes (private equity, private debt, infrastructure, real estate, and venture capital) could affect end accumulations through a target-date fund (TDF). The research compares a baseline TDF invested in public equities and bonds with TDFs that maintain private market allocations over the saving period.

The report considers how different private assets affect average end accumulation values, the volatility of end accumulation values, downside and upside results, and risk-adjusted performance. It also tests whether combining growth-oriented assets with more defensive private assets changes the balance between return and risk.

The report’s central message is that private market access is not a standalone investment decision. Outcomes depend on the role of each asset class, the size of the allocation, the structure of the glide path, the length of the accumulation period, regular contributions, fees, liquidity, valuation, and governance.

The study finds that private market allocations can improve risk-adjusted performance, but results vary by asset class and allocation size. Private equity shows the highest end accumulation values, while inclusions of defensive assets reduce variability. Ultimately, we show that the saving horizon, regular contributions, and glide-path design influence retirement outcomes matter as much if not more than the private market allocation.

This report is intended for the following:

• DC plan sponsors and fiduciaries 
• Target-date fund managers and product designers
• Pension trustees and master trusts
• Asset managers and retirement consultants
• Investment committees and chief investment officers
• Policymakers and retirement regulators
• Researchers examining private markets and retirement outcomes

It should also be valuable to advisers and participant-education teams that need to explain what private market allocations may or may not contribute to a retirement strategy.

• Distinguish the role of each private asset. Understand which private market exposures could improve end accumulation values, reduce volatility or strengthen downside outcomes.
• Evaluate private markets within the full TDF. Assess an allocation alongside the equity/bond mix, glide-path transition, saving horizon, contribution structure, and retirement objective.
• Interpret modeled results carefully. Recognize how historical data, valuation smoothing, return assumptions, and the difference between index exposure and an investable product shape the findings.
• Set implementation guardrails. Examine fees, liquidity, valuation, disclosure, conflicts of interest, operational capacity, and fiduciary oversight before expanding participant access.

Governments and retirement systems are exploring ways to bring more private assets into DC plans. The United States is clarifying the fiduciary process for considering alternative investments, the United Kingdom is encouraging private market allocations through pension reform, and the European Union, Hong Kong SAR, and Australia are developing or refining regulated approaches to access, valuation, liquidity, and governance. As policy barriers fall, the central question is whether a particular structure improves participant outcomes after fees and operates within credible fiduciary and investor-protection safeguards.

Retirement professionals can:

Start by defining the objective which private market allocation is expected to improve, such as higher growth, lower variability of outcomes, downside resilience, or diversification. Then, compare the proposed TDF with a transparent public-market baseline using several measures, not only the average end accumulation values. Examine the sensitivity of the model including assumptions on fees, valuation lags, liquidity needs, participant transfers, and different market environments. Document how the exposure fits the glide path, who oversees valuation and liquidity, how conflicts are managed, and what participants will be told. Adopt gradually when evidence, governance, and operational capacity support the decision.

The report examines private equity, private debt, infrastructure, real estate, and venture capital. It classifies private equity and venture capital as growth-oriented assets and private debt, real estate, and infrastructure as defensive assets.

No. Under some simulations, private equity and venture capital increased average end accumulation values, relative to the baseline TDF. For private debt, infrastructure, and real estate, while the average end accumulation value was lower, so was the volatility.

No. Each asset class and allocation size presents different trade-offs. The appropriate exposure depends on the plan’s objectives, participant profile, costs, liquidity needs, governance capacity, and ability to provide access through a suitable investment vehicle.

The simulations show that the investment horizon and glide-path design can influence outcomes as much as or more than the private market allocation. Private assets can complement regular contributions, compounding, and sound plan design, but they cannot replace them.

• Private markets consist of many asset classes.
  Private equity, private debt, infrastructure, real estate, and venture capital produce different combinations of expected wealth, variability, and downside outcomes.
• Private equity delivers the strongest modeled growth result.
  Under a 10% allocation, private equity produces the highest average end accumulation value and the highest average annual Sharpe ratio in the study’s main simulation.
• Defensive private assets change the shape of outcomes.
  Private debt, infrastructure, and real estate generally lower volatility of end accumulation values, even when they do not increase average wealth relative to the public-market baseline.
• Diversification involves trade-offs.
  Combining growth and defensive private assets can decrease volatility of end accumulation outcomes but also decrease the average end accumulation value and upside performance.
• Plan design can matter more than private market access.
  The accumulation period and equity-to-bond transition materially influence end accumulation and risk-adjusted performance. Asset inclusion should therefore be evaluated within the complete glide path.
• Modeled benefits require real-world guardrails.
  Fees, liquidity, valuation, product structure, disclosure, conflicts, and fiduciary oversight determine whether a theoretical allocation can translate into better participant outcomes.

• Private Markets: Governance Issues Rise to the Fore (Stephen Deane, 12 June 2024)
• De-Risking Global Pension Systems (David Knox, 26 June 2025)
• Capital Formation: Investing Pension Contributions in Private Markets Responsibly(Sviatoslav Rosov, 16 March 2020)