One thing I’ve learned in the retirement plan business is that participant demand usually runs ahead of what plan sponsors and providers are willing to offer. The Schroders 2025 U.S. Retirement Survey drives that point home. Almost half of defined contribution plan participants—45%—say they would invest in private equity or private debt if they had the chance. That’s up nine points from last year.
What’s more telling is the behavior behind that interest. Three out of four participants who want access to private assets said they’d actually increase their contributions if the option were available. For sponsors who complain about low contribution rates, this is a rare opportunity: a new feature that could encourage employees to put away more money for retirement.
The Reality Gap
Even with the demand, participants aren’t exactly optimistic. Only 30% think their plan will add private assets in the next five years. Almost half have no idea, and nearly a quarter don’t expect to see them before 2030. That hesitation is classic 401(k) industry behavior—we drag our feet, we worry about liability, and then years later we finally adopt what pensions have been doing for decades.
Traditional pensions have always mixed public and private investments. But because 401(k) plans are participant-directed, sponsors and providers have been slow to embrace alternatives. They fear fees, complexity, and the challenge of explaining investments that most employees barely understand.
How Much Participants Would Allocate
Participants aren’t looking to gamble. The majority—51%—would put less than 10% of their retirement assets into private investments. Another 36% would set aside 10 to 15%. Only 6% would go higher than that. Most participants clearly see private assets as a supplement, not a replacement for traditional core funds.
The Risk Perception
The survey also highlighted a split in perception. Nearly eight in ten participants think private assets improve diversification, and about three-quarters believe they can deliver higher returns. Yet over half still think private markets are risky. And when it comes to knowledge, only 12% of participants consider themselves very knowledgeable. The rest fall into the “somewhat” or “not much” categories. That lack of understanding is a flashing warning sign. You can’t drop complex investments into a 401(k) plan without a strong education component.
What This Means Going Forward
Private assets in 401(k) plans are no longer a theoretical idea—they’re a matter of when, not if. Regulatory momentum is building, and plan participants are asking for it. The real challenge will be structuring access in a way that is both practical and compliant. That likely means vehicles
like CITs or private equity sleeves in target-date funds, rather than a standalone fund that participants can dump half their account into.
For plan sponsors, the message is clear. Employees want more than the standard lineup of index funds and bond funds. They want access to the kinds of investments that pensions have used for decades. But before sponsors consider jumping in, they need to prepare for the responsibility that comes with it. That means setting allocation limits, monitoring fees, and most importantly, providing education that explains what private assets are—and what they are not.
As I’ve said many times before, innovation in the retirement space is great, but it has to be handled with care. Private assets could boost diversification, increase engagement, and drive contribution growth. But without the right guardrails, what looks like progress could just as easily turn into liability.