Private Assets in 401(k) Plans Pique Investors' Interest

More than one-third (36%) of investors participating in a 401(k), 403(b), or 457 workplace retirement savings plan say they would invest in private equity and private debt if their plan provided access to these assets, according to the 2024 U.S. Retirement Survey from global investment manager Schroders.

Notably, 80% of plan participants say access to private investments would entice them to increase the amount they are contributing to the plan.

Among those who expressed interest in private investments, most would take a measured approach with their allocations, Schroders said:

52% would allocate less than 10% of workplace retirement assets to private assets.
34% would allocate between 10 and 15% of workplace retirement assets to private assets.
8% would allocate more than 15% of workplace retirement assets to private assets.
6% are unsure how much they would allocate to private assets.

“Alternative investments such as private equity and private debt have long served as important portfolio diversifiers in defined benefit plans,” Deb Boyden, head of U.S. defined contribution at Schroders, said in a statement. “Given the evolution of the asset class in recent years, it’s a matter of when, not if, these investments will become more common in defined contribution plans.”

Despite the growing prominence of alternative investments in recent years, half of all plan participants (51%) surveyed don’t understand the benefits of adding alternatives to their retirement portfolio, and 64% say alternative investments sound risky.

This knowledge gap among plan participants isn’t limited to alternatives, as 52% of participants report they don’t know how to manage risk in their retirement portfolio, and 59% wish they received more guidance from their employer on how to invest their workplace retirement plan assets.

“Before private assets can reach their full potential, significant inroads in participant education must be made,” Boyden said.

The Schroders 2024 US Retirement Survey was conducted by 8 Acre Perspective among 2,000 U.S. investors nationwide ages 28 to 79, including 780 Americans who currently participate in a workplace retirement plan. The survey was conducted from March 15 to April 5, 2024.