Private equity giants have long sought access to Americans’ retirement accounts. The White House is no longer standing in their way.
In August of last year, President Donald Trump issued an executive order calling for the “democratization of access to alternative assets for 401(K) investors.” This March, the US Department of Labor responded by proposing new regulations to increase “potential retirement investment options for more than 90 million Americans.” The US Securities and Exchange Commission seems to be moving in a similar direction.
“Anytime I start to hear the democratization of financial solutions to the public, a sort of hair raises on my back,” says Ian Fuller of Westfuller, a values-driven investment advisory firm, on the latest episode of Impact(ed). “Alarm bells start to go off.”
Fuller joins Ben Schiffrin of Better Markets and co-hosts Rodney Foxworth and Eric Horvath to discuss what such a move would mean for retail investors on the first episode of the third season of Impact(ed), a member of the ImpactAlpha Podcast Network.
Holy grail
Larry Fink of asset management giant BlackRock is among those that have forcefully made the case for merging public and private markets. “Assets that will define the future — data centers, ports, power grids, the world’s fastest-growing private companies — aren’t available to most investors,” he wrote in his annual letter to investors last year.
Big private investment firms like Apollo Global Management are also readying new “semi-liquid” funds to tap into the retail market. But some investors in those funds are finding out the hard way that getting their money out is not so easy. Big PE and private credit funds facing liquidity constraints may see the retail market as a convenient exit option, critics say.
“It’s not that retail investors are clamoring for greater access to these illiquid, opaque, risky private market assets,” says Schifrin, who directs securities policy at Better Markets. “It’s that the private funds industry is pushing to get access to retail investors.”
Traditional institutional investors — pension, endowments and foundations — have long been the backbone of private equity and private credit fundraising. But slowing exits and redemption pressures have pushed firms to look for capital from nontraditional sources.
“The private funds industry views the $12 trillion Americans have in retirement accounts as the Holy Grail,” Schifrin says.
As of 2025, Americans were estimated to hold $14.2 trillion in all defined contribution employer-based retirement accounts, $10.1 trillion of which was held in 401(k)s.
That dynamic has created an uneasy tension for advocates focused on economic inclusion. On the one hand, says Fuller, the accredited investor rules which allow participation in the private markets have historically excluded many communities, particularly people of color, from wealth-building opportunities available in private markets. But he questions whether opening retirement accounts to opaque and illiquid assets is the right corrective.
“Most private market investments are not outperforming the S&P 500,” Fuller says. “Most active managers are not outperforming the S&P 500.”
Rethinking retirement
Still, the idea of democratizing financial markets holds appeal as a path to broader wealth creation, especially as growth companies stay private longer or avoid public markets altogether.
Most of the highest impact funds are private, meaning they are only accessible for institutional or high net worth investors. Some impact advocates, for example, see an opportunity for impact credit funds, which generate regular dividends in long-term target-date retirement funds. Yet the complexity, risk, long lockup periods and cost of private market vehicles, especially by less mission-driven actors, is often at odds with the retail market.
The Department of Labor proposal amounts to “a flawed replacement for the traditional corporate pension plans that many Americans used to enjoy,” former Treasury advisor Steven Rattner wrote in The New York Times this month. He argued for “an ambitious rethinking of the architecture of our retirement system.”
One Trump proposal has been received more favorably: so-called “Trump accounts” that set up retirement accounts for workers without employer-sponsored plans and match contributions up to $1,000 annually. Another fix: raising taxes to shore up Social Security funds.
Who bears the risk
In private equity and venture capital, returns are concentrated among top-tier managers, with roughly the top 10% producing 90% of overall returns. Institutional investors with dedicated teams and long-standing relationships have a real shot at accessing those managers. A teacher or a firefighter with a 401(k) does not, says Fuller.
Then there are management fees. The standard private markets structure — a 2% annual management fee plus 20% of profits — dwarfs the roughly 0.03% charged by a Vanguard S&P 500 index fund.
Liquidity may be the most important sticking point. Private funds typically cap withdrawals at 5% per quarter, and redemption requests at some funds are already exceeding that limit. For retirement savers increasingly drawing on their 401(k)s to cover basic living expenses, being told to wait is not a minor inconvenience.
“Think about what that’s going to do to people who are really depending on access to those funds,” says Schifrin.
For both Fuller and Schiffrin, the simplest retirement strategy remains difficult to improve upon.
“We finally got people to understand that low-cost index funds are a great way to save for retirement,” Schiffrin says. “And now we’re going to turn around and push them into risky, illiquid and expensive private market assets.”