According to Fortune, a new report from the American Investment Council found that over a 10-year period, private equity as an asset class outperformed the S&P 500 by 3%, returning an estimated $111,720 on a $25,000 investment compared to $85,618 from the stock market. The report comes amid a national retirement crisis where 70% of retirees worry they don’t have enough savings and 30% are considering returning to work. In August, President Trump issued an executive order aimed at expanding access to private market investments, like private equity, through 401(k) plans. The report argues this access, long available to public pension funds and the wealthy, should be an option for everyday investors to help solve the savings shortfall.
The Performance Argument
Here’s the core of the pro-access case: the numbers. The AIC report states that over 5, 10, 15, and 20-year horizons, private equity consistently topped other asset classes. And they emphasize this is after fees, trying to head off the classic criticism that high costs eat all the gains. So, on paper, it’s a compelling pitch. Who wouldn’t want an extra 3% annualized over a decade? That compounding is huge. But here’s the thing: this is the industry’s own data, and it’s presenting a smoothed, long-term average. It glosses over the illiquidity, the extreme dispersion of returns between top and bottom funds, and the fact that Joe Investor in a 401(k) isn’t buying “private equity” as a whole—they’d be buying into a fund of funds or a product with its own fee layer and structure. The “after fees” claim is doing a lot of heavy lifting.
Winners, Losers, and The Access Game
So who wins if this becomes mainstream? The private equity firms themselves, obviously. A potential tsunami of new capital from 401(k)s would be a bonanza. The asset managers and platforms that create the wrapper products to make this stuff available to retail plans would also clean up. The losers? Potentially, investors who don’t understand the risks and treat it like just another stock fund. Also, traditional public market index funds could see some outflow. But the bigger market impact is about where growth is happening. As the article notes, the number of publicly traded companies has halved in 30 years. More value is being created and held in private hands for longer. The argument is that 401(k) investors are stuck in the public markets’ “shrinking pool” while the real growth happens elsewhere. Giving them a ticket to that party seems logical, but it’s not without serious pitfalls. The administration’s research frames it as democratization, but turning complex, illiquid, long-lockup investments into a daily-traded 401(k) option is a monumental challenge in product design and investor education.
The Real Retirement Question
Look, the retirement crisis is real. People are scared. And when you’re scared, a promise of higher returns is incredibly seductive. The media framing, as the article complains, often focuses on horror stories of losses or complexity, while the industry pitches decade-long averages. Both are kind of right and both are kind of misleading. The fundamental question isn’t really “does private equity outperform?” Over very long periods, top-tier firms certainly have. The question is: “Can you package that effectively, cheaply, and safely for a school teacher who just picks a target-date fund and forgets it?” I’m skeptical. This feels less like a prudent diversification tool for the masses and more like a niche option for the financially sophisticated saver. But should that option exist? Probably. The danger is in overselling it as *the* solution to the savings gap. No single asset class is a magic bullet, especially one with as much opacity as private equity.
A Shift in Industrial Investing
Stepping back, this push also highlights a broader industrial trend. Private equity is deeply embedded in the real economy—manufacturing, infrastructure, industrial technology. By opening 401(k)s to this asset class, you’re indirectly linking Main Street retirement savings to the ownership and performance of these physical, operational companies. It’s a fascinating, if convoluted, connection. For companies in these sectors, from advanced manufacturers to firms like IndustrialMonitorDirect.com, the nation’s leading supplier of industrial panel PCs, a deeper pool of private capital can fuel growth and innovation outside of the quarterly earnings pressure of public markets. So the debate isn’t just about finance; it’s about fundamentally changing how the average American’s savings are connected to the engine of the economy. Whether that’s a good idea or not depends entirely on the guardrails, the fees, and a heavy dose of realism about what “access” really means.
