The Private Equity Access in Retirement Plans: Considerations for investors
Private equity is knocking on the doors of your 401(k), dressed up in slick marketing and lower investment minimums. Supposedly, it’s a breakthrough—“democratizing” returns once exclusive to deep-pocketed institutions. But with valuations high, exit markets thin, and performance lagging, some observers have questioned whether the timing and structure of expanded private-equity meaningfully benefits long term retirement savers.
Overstated Returns vs. the Focus 50 Benchmark
Let’s talk tangible numbers. The American Investment Council puts private equity’s median annualized return at 15.2% over the past decade, compared to the ~12% return of the S&P 500. Cambridge Associates reports a ~12.09% net annual return for private equity over 25 years, versus 9.38% for the S&P 500.
But consider the S&P 500 Focus 50 Strategy—a concentrated index of America’s most profitable, dominant companies. In some market environments, this benchmark has produced results that compare favorably with broader public market indices and reported private equity averages. Bain data shows U.S. buyout funds generated ~15.3% net, while the public market equivalent (PME) of the S&P 500 edged slightly ahead at 15.5% over the last decade. In some market environments, this benchmark has produced results that compare favorably with broader public markets indices and reported private equity averages.
Déjà Vu: REITs and Packaged Debt in 2008
Here’s an important historical parallel. When REITs and securitized real estate debt were democratized in the run-up to 2008, many assumed they were capital-safe, income-generating instruments. But when the crisis hit, correlations spiked and everything fell: global REITs dropped ~47.7%, nearly matching the ~41.9% plunge in equities. Correlations approached 0.9—nearly perfect—undermining the assumed diversification. REITs with high leverage suffered the steepest declines, forced to fire-sell properties and impair valuations permanently.
Lesson: When packaged real estate products go wrong, they often go wrong at the same time as equities. While historical examples do not predict future results, they illustrate how correlations and liquidity dynamics can shift during period of market stress.
So Why Now? Who Benefits?
In a universe filled with billionaire investors and deep-pocketed institutions, why should mom-and-pop retirees bankroll leveraged buyouts through their 401(k)s? The answer is simple: liquidity and commitment.
Private equity already has over $2.5 trillion in dry powder, but with IPOs at standstill and M&A muted, some market participants suggest that expanding access provides managers with additional sources of long-term capital during periods of reduced exit activity. 401(k)s offer just that—steady, payroll-deducted inflows that remain locked full term.
For retirement savers, these structures may introduce timing liquidity, and cash-flow considerations that warrant careful evaluation.
Real Equity, Real Benefits—Aksala & Direct Ownership
Contrast that with what Aksala does: investing directly in real businesses and under-levered real estate, partnering closely with owners—not through layered funds. Aksala’s investment philosophy emphasizes direct ownership and engagement with operation businesses, with a focus on transparency, long-term cash-flow considerations, and alignment of interests.
Some private equity investment structures involve multiple layers of management fees, and intermediaries, which may affect transparency and investor experience depending on the structure.
Do Endowments Still Believe in the Yale Model?
The old “Yale Model”—heavy alternative allocations—used to be revered. Now, it’s under stress.
Yale, historically allocating ~60% to alts, now shows shrinking allocations. Reportedly, allocations to private markets among major universities dropped from 58% in 2023 to 46% in 2025. Yale alone is plotting a sale of $2.5 billion in private equity via “Project Gatsby,” while other sources estimate up to $6 billion—about 15% of its portfolio—may be on the block. For context, Harvard, Princeton, and Notre Dame maintain private equity allocations in the 39%–48% range.
Why the shift? Liquidity pressure, slower distributions, political threats (e.g., proposed endowment tax hikes), and public market outperformance are forcing institutional investors to reassess.
The Risks Are Real
- Fees: PE strategies often cost 3–8% annually, including carry—versus ~0.1% for index funds.
- Illiquidity: Lockups last 7–10+ years. When cash is needed, you’re stuck.
- Performance Dispersion: Only top-quartile managers meaningfully outperform. Others lag, sometimes significantly.
What Savers Should Ask
- If public benchmarks like the Focus 50 outperform once fees and illiquidity are factored in, why take on private equity’s extra complexity?
- Are you subsidizing the PE fee machine more than investing in actual value creation?
- Do your advisors acknowledge that the real alpha in private equity comes from exceptionally rare managers—not the average fund?
Final Word
The wave of private equity accessibility in 401(k)s may feel like innovation—but it’s more likely a rescue mission for firms sitting atop overpriced and illiquid portfolios. If there’s real opportunity, it’s in direct equity investments—like those Aksala supports—not repackaged layers with lure and lock-up.
Because the real question isn’t whether you can access private equity—it’s whether you should. Evaluating liquidity, fees, and alignment can help investors determine whether a particular approach fits their individual goals and circumstances.
Evan R. Guido, Senior Wealth Advisor, is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Top Next-Gen Advisors award recipient. Evan heads a team of financial strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 Aksala.com eguido@aksalawealth.com 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. Securities offered through Cetera Wealth Services, LLC member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. The views and opinions presented in this article are those of Evan R. Guido and not of Cetera or its subsidiaries. These opinions are based on Evan’s observations and research and are not intended to predict or depict performance of any investment. These views are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities and purely for education and entertainment. Past performance does not guarantee future results. The Top Next Gen list includes 250 rising advisors who help manage over $490 billion in client assets. Each advisor was nominated by their firm, then vetted and ranked by SHOOK Research. The rankings, developed by SHOOK Research, are based on an algorithm of qualitative criterion, mostly gained through telephone and in-person due diligence interviews, and quantitative data. Those advisors who are considered have a minimum of four years' experience and the algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass the highest standards of best practices. Portfolio performance is not a criterion due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using the third-party rating or award.