All Aboard the PE Express: Private Equity’s Next Stop Could Be Your 401(k)

Blue Owl Capital’s announcement this week of a strategic partnership with Voya Financial to bring private equity into 401(k) plans marks another milestone in what’s becoming an unstoppable trend. With Voya’s 9 million retirement plan participants and $630 billion in assets meeting Blue Owl’s private markets expertise, the locomotive of “democratized” alternatives is clearly picking up steam. 

Why should institutional investors monopolize 14% returns while 401(k) participants settle for 8%?¹ With fewer public companies today than 30 years ago,² and private markets representing 25 times more investment opportunities,³ the exclusion of retail investors from PE seems increasingly arbitrary. Apollo’s CEO Marc Rowan frames it pretty bluntly: 

“We levered the entire retirement of America to Nvidia’s performance. It just doesn’t seem smart.”⁴ 

President Trump is reportedly finalizing an executive order directing the Labor Department and SEC to develop guidance for including private assets in 401(k) plans. This would reverse Biden-era skepticism and potentially unleash a flood of alternative investments into retirement accounts. The political momentum, combined with industry lobbying, suggests regulatory barriers will soon crumble. 

Yet Timing Is Everything 

Private equity’s golden age of cheap leverage has ended. From Q2 2022 through Q2 2024, PE returns of 6.8% have actually trailed the S&P 500’s 12%.⁵ Traditional institutional investors—the “smart money”—are pulling back just as PE firms desperately court the $12.5 trillion in 401(k) assets.⁶ One might reasonably ask: are retail investors being invited to yesterday’s party? 

The fundamental challenges remain daunting. Private equity’s typical 2-and-20 fee structure has the potential to devastate retirement returns.⁷ Liquidity constraints don’t align well with job changes or emergency withdrawals. Transparency—already limited in public markets—becomes nearly opaque in private markets. As Senator Warren noted in her recent letter to Empower, these structural risks haven’t been adequately addressed.² 

But technology might change everything. Tokenization could fractionate million-dollar minimums into thousand-dollar investments. Imagine buying a $1,000 token representing diversified exposure to top-tier PE funds from Blackstone, KKR, and Apollo as part of a diversified portfolio. These tokens could trade 24/7 on blockchain-based exchanges, providing daily liquidity for traditionally illiquid assets. Smart contracts could automatically distribute returns, enforce investment limits, and ensure transparent fee disclosure. We’re witnessing the same democratization pattern that transformed stock trading in the 1970s and mutual fund access in the 1990s. 

First Class or Coach? 

The critical question: will retail investors get quality access or table scraps? Good PE access would mean investing alongside institutions in flagship funds, reasonable fee structures (perhaps 1-and-15 instead of 2-and-20), and true liquidity through robust secondary markets. Bad access looks like fund-of-funds with double-layer fees, repackaged older vintage funds that institutions no longer want, and “PE-lite” strategies that capture fees but not returns. Early partnership announcements suggest a mixed bag—some genuine innovation alongside obvious fee grabs. 

Modern platforms could theoretically provide sophisticated correlation-based risk management, ensuring high-risk PE allocations are properly hedged with uncorrelated assets. A well-designed system might limit PE to 10% of portfolios while requiring offsetting allocations to volatility strategies, trend-following funds, or structured products that spike when correlations break down. This “fourth dimension” of risk management—protecting against unknown unknowns—could make PE safer for retail than simply buying index funds and hoping. 

The Inevitable Transformation 

Looking forward, this transformation appears inevitable. Too much capital seeks returns, too many firms have invested in infrastructure, and technology makes traditional barriers increasingly obsolete. Like previous financial democratizations, resistance seems futile. The question isn’t whether PE enters 401(k)s, but whether it enriches retirement savers or merely enriches PE firms. 

For retirement savers, vigilance is essential. Demand transparency on fees, ensure true liquidity options exist, and verify you’re accessing quality funds—not yesterday’s leftovers repackaged for retail consumption. Ask whether your platform provides genuine institutional access or just expensive imitations. The locomotive has left the station; the job is to ensure passengers arrive safely at their destination. 

Progress rarely asks permission, but that doesn’t mean we should board every train without checking where it’s headed. Private equity in 401(k)s will happen. Making it work for Main Street rather than just Wall Street will require the kind of healthy skepticism that keeps markets honest.