
A new executive order under consideration by the Trump administration could reshape how Americans invest for retirement. But will the presence of private equity in retirement plans benefit investors?
The Big Ideas:
- Expanding 401(k) access to private equity could diversify portfolios and improve long-term outcomes — if implemented with care.
- Due to the complexity of private equity strategies and limited transparency, it’s challenging for individual investors to evaluate and choose the right managers.
- Professional oversight is essential to ensure retirement savers benefit from access without being burdened by excessive fees or risk.
In a move that could dramatically expand access to private-market investing, a possible executive order from the Trump administration aims to lower restrictions on adding private assets like private equity in defined-contribution retirement plans such as 401(k)s. While this could open new opportunities for millions of American investors, Bilge Yılmaz and Burcu Esmer, academic directors of Wharton’s Harris Family Alternative Investments Program, note the important questions this raises about access, investing expertise, and how to plan for the long run.
“Public pension plans are the largest contributors of capital to the broadly defined private equity asset class,” explains Professor Bilge Yılmaz. “This makes sense from several points of view. These are long-term investments by design and allow public employees to have access to the illiquidity premium. It provides higher and differentiated returns that allow a better portfolio construction.”
Defined-contribution plans like 401(k)s, by contrast, have traditionally limited participants to publicly traded stocks and bonds. These assets offer liquidity and transparency, but as Professor Yılmaz points out, “this limitation reduces portfolio diversification as well as expected returns – and precludes access to the illiquidity premium.”
Would broadening access to private markets improve outcomes for individual retirement savers?

In theory, expanding access to private markets could improve retirement outcomes by diversifying portfolios and enhancing returns. But Professor Yılmaz emphasizes that success depends on how investing strategies are implemented.
“Constructing a well-diversified private equity portfolio requires significant expertise in the asset class as well as resources for due diligence in the manager selection process,” he explains.
Individual investors often lack this level of expertise, so they’d rely on other stakeholders: investment professionals who bring the necessary experience but add cost and introduce potential issues of agency.
“At a time when exits are becoming more challenging and continuation funds are becoming more and more common, the unsophisticated defined-contribution plan members may end up paying large fees without the benefits of superior returns.”
Professor Yılmaz’s insights highlight both the potential and the complexity of opening up private markets to everyday investors.
Can private equity be made accessible to individual retirement savers — responsibly?

Burcu Esmer, academic co-director of the Harris Family Alternative Investments Program, sees promise in opening up private equity to retirement savers if accompanied by the appropriate guidance.
“It’s worth acknowledging both the promise and the complexity. Much of the value creation in today’s economy is happening in private markets, yet retail retirement savers are largely excluded,” Professor Esmer explains.
She continues, “Opening avenues to private equity can significantly enhance the investment universe available to long-term savers, potentially improving returns and diversification. But this shift must be approached with care.”
She points to challenges such as higher fees, lack of transparency, and the complexity of manager selection, but also notes these complexities are manageable.
“These challenges can be mitigated through investor education and thoughtful plan design: professionally managed vehicles, multi-manager funds, and target-date structures can balance opportunity with risk mitigation,” Professor Esmer explains. “We should not expect individuals to navigate private equity alone, but nor should we assume they must be excluded entirely. With the appropriate oversight, education, and carefully designed investment structures, private equity can become a meaningful and responsible addition to the retirement investment landscape.”
As this conversation evolves, Professors Yılmaz and Esmer highlight both the potential benefits and concerns around making private equity available for retirement accounts. With the right structures in place, private equity could become a valuable part of the future of retirement savings.
Learn more about Professor Bilge Yılmaz.
Learn more about Professor Burcu Esmer.
Visit the Harris Family Alternative Investments Program website.
Photos from Wharton Alternative Investments Summit by Shira Yudkoff Photography