Private market allocations in 401(k) plans can lift retirement outcomes

New CFA Institute research shows that modest exposure to private assets can improve risk-adjusted performance inside defined contribution plans; but the benefit depends heavily on which assets are chosen and how the overall fund is designed.

The report from the CFA Institute Research and Policy Center, Private Markets in Retirement Plans: Returns, Risks, and the Importance of Plan Design, modeled 10,000 accumulation paths for a stylized target-date fund (TDF) using return data from January 2010 through December 2024.

 It examined five private market asset classes - private equity, private debt, infrastructure, real estate, and venture capital - alongside public equities and fixed income, making it one of the most comprehensive multi-asset analyses of private market allocations in DC plans to date.

The timing is significant. On March 30, 2026, the U.S. Department of Labor proposed a rule that would establish a clearer fiduciary framework for including alternative investments in 401(k) plans, reducing regulatory uncertainty for plan sponsors considering private assets. This week senior Democrats including Senator Bernie Sanders urged a DOJ and FBI investigation into thousands of allegedly fake comments backing DOL's private-assets 401(k) rule.

With roughly $14 trillion sitting in U.S. defined contribution plans, the debate over private market inclusion has moved from theoretical to operational.

Not all private assets are equal

The study found that a 10% allocation to any single private market asset class improved risk-adjusted performance (measured by the mean annual Sharpe ratio) relative to a baseline portfolio of public equities and bonds. But the nature of the improvement varied sharply by asset class.

According to the CFA Institute report, TDFs with allocations to private equity produced the highest average end accumulation value - $1.489 million versus $1.316 million for the baseline - representing a 13% increase in nominal retirement wealth. Venture capital also lifted average accumulation values, though with considerably greater volatility.

By contrast, allocations to private debt, infrastructure, and real estate each produced lower average end accumulation values than the baseline public-market-only portfolio.

What they offered instead was a meaningful reduction in volatility, which drove the improvement in risk-adjusted returns. For advisors and plan sponsors evaluating private market inclusion, the CFA Institute's findings available through Investmentnews.com's coverage of private markets in DC plans underscore that the asset class selection question is as important as the access question.

Combining assets: mixed results

The report also examined what happens when two private market asset classes are included simultaneously;  pairing a growth-oriented asset such as venture capital or private equity with a defensive one such as private debt, infrastructure, or real estate.

Combining venture capital with a defensive private asset reduced end-accumulation volatility and modestly improved risk-adjusted performance compared with venture capital alone. However, adding a defensive asset alongside private equity lowered both average end accumulation values and the Sharpe ratio relative to a portfolio holding only private equity, because the defensive allocation reduced the overall growth exposure of the fund.

The finding points to a core principle the report emphasizes: private market allocations must be evaluated for how they interact with one another, not just with public assets.

Plan design matters as much as asset selection

Perhaps the report's most consequential finding for plan sponsors is that the design of the TDF itself, particularly the glide path from equities to bonds and the length of the accumulation period, can affect retirement outcomes as much as or more than any private market allocation decision.

The CFA Institute's modeling showed that shortening the accumulation period from 40 years to 30 years caused average end accumulation values to fall by approximately 65% across all TDF types, regardless of their private market exposure. Changes to the equity-to-bond transition period produced similarly outsized effects. As the report notes, contribution levels and the time over which cash flows are compounded remain the most critical variables in achieving adequate retirement income - not the composition of the private market sleeve.

Olivier Fines, CFA, head of advocacy and policy research at CFA Institute, said in a statement that opening access to private assets is not the same as improving retirement outcomes. "The answer depends on the asset class and the design of the plan," he said.

Raymond Pang, PhD, senior researcher at CFA Institute and co-author of the study, added that the results are fundamentally a portfolio-construction question, not simply an access question.

Governance and fees remain critical

The study uses PitchBook global indexes for private market returns, which are net of fees and based on closed-end drawdown funds. The report explicitly notes that private market funds typically carry higher fee structures than public market equivalents - often a 2% management fee and 20% performance fee model - and that fee transparency remains a key challenge for retail-facing products.

Regulatory concerns are live. The report references redemption restrictions at Blue Owl's private credit fund in February 2026 and Blackstone's Real Estate Income Trust from 2022 to 2024 as examples of the liquidity mismatch risk that retail-based access to private markets can create. Advisors working with plan sponsors on DC plan design should weigh these structural considerations carefully, particularly for participants nearing retirement who have limited capacity to absorb illiquidity events.