Five Questions Plan Sponsors Are Asking About Private Markets in Defined Contribution Plans

Heather von Zuben

Why do you believe retirement savers should have access to a broader investment tool kit?

Heather von Zuben: That’s really at the heart of the conversation taking place across the retirement industry today. If you look at pension plans, they allocate roughly 30% of their portfolios to private markets on average.¹ Yet many retirement savers who invest primarily through a 401(k) have historically had little or no exposure to private markets. ¹

One of the reasons institutional investors have embraced private markets is that public markets have evolved. Public markets have become more concentrated and less representative of the broader economy. Nearly 90% of companies globally with revenues of $250 million or more are privately owned,² and the number of publicly listed companies in the U.S. has declined by roughly half over the past 30 years. ³

These trends illustrate how a growing share of value creation is occurring outside the public markets.

The other important piece is returns. Historically, private markets have delivered higher returns with lower reported volatility than comparable public markets. ⁴ For retirement savers with long investment horizons, that return potential can compound over time and ultimately support better retirement outcomes.

Pension plans and other institutional investors have used private markets for decades to enhance diversification and build more resilient portfolios. We believe retirement savers should have access to the same tools.

How can private markets affect risk and diversification within a 401(k) portfolio?

von Zuben: When people hear “private markets,” they often assume more risk, but because private market investments tend to have lower correlation to public stocks and bonds, they can provide an additional source of diversification and help build more resilient portfolios, particularly during periods of market volatility. As the diversification traditionally provided by stocks and bonds has become less reliable, additional sources of diversification have become increasingly valuable. ⁵

Private real estate, for example, has exhibited roughly one-third the volatility of public REITs ⁶ and delivered positive performance in seven of the eight years when the S&P 500 was negative. ⁷

Beyond diversification, certain private market asset classes, such as private real estate and private infrastructure, may also help address inflation risk. That’s especially important in retirement investing, where participants are saving over decades and their portfolios must navigate multiple market cycles along the way.

The goal is to give retirement investors access to a broader set of tools that can support diversification, manage volatility, help address inflation and improve long-term retirement outcomes.

Fees are often part of the conversation around private markets. How should plan sponsors think about that trade-off?

von Zuben: Fees are certainly an important consideration. Private markets have traditionally come with higher fees than public investments, reflecting the active management and extensive value-creation efforts involved. Unlike public market investing, managers often source opportunities, conduct due diligence and work closely with portfolio companies to create value over time.

What can sometimes get lost in the fee discussion, however, is the value delivered to investors after accounting for fees. Historically, private markets have generated attractive net-of-fee returns relative to public markets. Private equity, for example, has outperformed public equities by approximately 500 basis points annually over the past 20 years net of fees. ⁸

Ultimately, the question should be viewed through the lens of the net benefit to retirement savers. Plan sponsors should evaluate whether private markets can help improve long-term participant outcomes, net of all fees and expenses.

Can private markets fit within the liquidity requirements of a defined contribution plan?

von Zuben: We believe they can. The key is to recognize that private markets would typically represent only a portion of a broader retirement portfolio, not the entire portfolio. Participants would continue to have substantial exposure to traditional stocks and bonds that provide daily liquidity.

In addition, structures such as perpetual funds can provide periodic liquidity, subject to certain limits, while allowing participants to maintain exposure to private markets. Combined with the daily liquidity available through the broader portfolio, we believe these structures can help balance participant and plan liquidity needs with the potential benefits of private markets.

It’s also important to remember that retirement savings are long-term savings. A 401(k) isn’t designed to function like a checking account. Most participants are investing over decades, and historically there has been relatively limited demand for withdrawals prior to retirement. ⁹ That long-term investment horizon is one reason private markets can be a natural fit within a retirement portfolio.

How might participants gain access to private markets within a 401(k) plan?

von Zuben: Private markets can be incorporated into professionally managed solutions, such as target-date funds, managed accounts, or other diversified investment options available within a 401(k) plan.

This is similar to how participants access many investment strategies today. Rather than making individual allocation decisions, participants could benefit from professional portfolio construction, due diligence, and ongoing oversight and management.

Visit the Blackstone Defined Contribution website to learn more.

The opinions expressed herein reflect the current opinions of Blackstone as of the date appearing in this material only. There can be no assurance that views and opinions expressed in this document will come to pass. Certain information provided herein, in particular with respect to market data, economic or other forecasts is derived from third-party sources. Blackstone makes no assurances as to the accuracy of such information. Readers should carefully review the endnotes associated with this article.

¹ DC Plan AUM, ICI, 2025. Private Markets Exposure, NASRA Public Funds Survey, 2024, and The Council of Economic Advisors, 2024.

² Capital IQ, June 2024. Represents the share of companies based on the total number of public and private companies in North America, Europe, and Asia that have reported 2024, 2023, 2022, or 2021 fiscal year revenues greater than $250 million per Capital IQ’s company database.

³ World Federation of Exchanges, December 2025.

⁴ Morningstar, over the 20-year period from January 1, 2005 to January 1, 2025. Return and Volatility are based on quarterly returns. Volatility is represented by the standard deviation. The returns and volatility of the asset classes presented are based on the following indices: Private Equity: Cambridge Associates US Private Equity Index. Public Real Estate (Global Public REITs): S&P Global REIT Index. Public Credit (US Leveraged Loans): Morningstar LSTA US Leveraged Loan Index. Private Real Estate: NFI-ODCE Index. Private Credit: Cliffwater Direct Lending Index. Global Public Equity Stocks: MSCI ACWI Index. Private Infrastructure: Cambridge Associates Private Infrastructure Index. Public Infrastructure: S&P Global Infrastructure Index.

⁵ Morningstar, as of December 31, 2025. Equities represented by S&P 500. Bonds represented by Bloomberg US Treasury Total Return Index.

⁶ Morningstar Direct, NCREIF, as of December 31, 2024. Indices are meant to illustrate general market performance. Comparisons shown are for informational purposes only, do not represent specific investments and are not a portfolio allocation recommendation. An investment in a yield-oriented U.S. Core+ strategy for income-focused individual investors (the “strategy”) has material differences from a direct investment in real estate, including related to fees and expenses, liquidity and tax treatment. The strategy’s share price is subject to less volatility because its per share NAV is based on the value of real estate assets it owns (which may fluctuate and may be worth less than initial price) and is not subject to market pricing forces as is the price of the indices presented. The strategy shares are significantly less liquid than public REITs and may fluctuate. Private real estate is represented by the NFI-ODCE and reflects total returns excluding management and advisory fees. Public REITs are represented by the total return of the MSCI U.S. REIT Index.

⁷ Reflects annual gross total returns and represents the 8 calendar-year periods since 1980 when the S&P 500 generated a negative return. In the other 37 calendar-year periods since 1980, the S&P 500 has generated a positive return, and this is not meant to imply that the S&P 500 has outperformed private real estate across all of these periods. Private real estate reflects the NFI-ODCE index, which reflects total returns of various private real estate funds and should not be considered reflective of the performance of any one fund or strategy. Indices are meant to illustrate general market performance. Comparisons shown are for informational purposes only, do not represent specific investments and are not a portfolio allocation recommendation. Over the last 20 years (2005-2024), the S&P 500 and NFI-ODCE index have had a 0.0 correlation.

⁸ As of June 30, 2025. “Private Equity” is represented by the pooled returns of the blended Cambridge Private Equity Index which is comprised of buyout funds and growth equity funds. “Public Equities” are represented by the Cambridge Modified Public Market Equivalent (“PME”) analysis of the MSCI World Index. Comparisons of private equity performance to an index are therefore based on the difference in performance between Cambridge Private Equity Index IRR and the hypothetical PME return of the applicable public index. Hypothetical PME index performance may differ materially from the performance of such index during the same time period on account of the adjustments made for the timing of cash flows as per the PME analysis. Indices are provided for illustrative purposes only, and there are significant risks and limitations to relying on comparisons to an index, including the PME adjustments.

⁹ How America Saves, Vanguard, June 2026.

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