How private markets could improve retirement outcomes

The stakes for retirement investors

Most employers in the U.S. have shifted from defined benefit (DB) pension plans to defined contribution (DC) plans, such as 401(k)s. With this shift, it’s the individual – not employer – who is now responsible for their retirement readiness. Yet in the shift, individuals lost access to the full range of investment opportunities historically available through DB plans.

Roughly 85 million Americans rely on (DC) plans to save for retirement. For many, these plans represent their first—and often only—experience with investing. And being able to retire on their own terms may depend on how the portfolios in these plans are designed.

The remaining gap: access to private assets

The DC system continues to evolve. The SECURE 2.0 Act, for example, has strengthened automatic enrollment and expanded emergency savings programs, while employers are increasingly offering guaranteed income solutions that can help savers spend with more security throughout retirement.

Despite this progress, one key lever remains largely out of reach: private assets. DB plans have long included private markets—approximately 16% on average³—and have historically outperformed 401(k) plans by roughly 50 basis points annually.

With global access to these asset classes expanding across wealth and retirement channels, bringing them to DC participants is becoming a more tangible opportunity⁴.

More than 30 years ago, we helped reshape retirement investing by introducing target date funds. Today, we see a similar opportunity: to improve participant outcomes by thoughtfully incorporating private assets into DC plan structures.

How private assets could increase 401(k) savings by approximately 15%

Private assets have seen strong growth across private markets in recent years - and BlackRock estimates that private market opportunities can grow by more than two-thirds by 2029, reaching $23 trillion.⁵

We anticipate private assets will continue to outperform public assets over the coming decade, and our research suggests that including them within a target date fund solution can offer a range of potential benefits for retirement savers, including:

• Improved risk-adjusted returns
• Enhanced diversification
• More stable cash flows
• Potential inflation protection

Using BlackRock Investment Institute capital market assumptions and Preqin data, we estimate that incorporating private equity and private credit into DC plans through a target date fund could increase annual returns by approximately 50 basis points.

Over a long-term investment horizon, this incremental return compounds meaningfully. A ~50 basis point increase in annual returns may result in approximately 15% higher 401(k) savings over 40 years⁶.

A purpose-built approach to integrating private assets into target date funds

What does this look like in practice? We envision a retirement plan solution that thoughtfully integrates private assets into target date strategies—the most common default option in DC plans—through purpose-built exposures.

This does not mean simply “bolting-on” an existing stand-alone private asset fund to a portfolio of public securities. Rather, we’d consider the benefits and risks of private assets at each stage of workplace investor’s lifecycle, as well as how private assets may interact with public markets within the portfolio.

Our approach to this choice would involve making relatively modest allocations to private assets earlier in a saver’s career—when time horizons are longer—and then gradually reducing those exposures as they approach retirement and liquidity needs increase.

Addressing DC plan fiduciaries top concerns

Private assets have long been regarded as the ‘black box’ of investing—less liquid, harder to see into and often more expensive to access. But as they step into the spotlight of mainstream portfolios, we’re innovating to crack that box open—bringing greater transparency, smarter pricing and broader access than ever before.

We see a significant opportunity to create better retirement outcomes for millions, but we also recognize that the plan must operate in accordance with legal and regulatory requirements and act in the best interest of plan participants. As such, we recognize there are questions around adding private assets to DC plans, including liquidity, fees and transparency. We are focused on ensuring processes meet the high standards under applicable legal requirements. There are many practical considerations to resolve, and the fiduciary responsibility is significant.

With these considerations in mind, a thoughtfully designed solution would seek to incorporate private assets while maintaining DC-friendly characteristics—such as competitive fees and transparency—supported by ongoing education.

Key considerations include:

1. Fees: A solution that maintains competitive, transparent pricing will require allocating to private assets in a way that enables fee simplicity and avoids further fees (including for distribution) by sourcing investments from our own extensive private assets platform.
2. Cash drag: A solution that helps address concerns about cash drag in private asset solutions by sourcing liquidity from the broader target date strategy and a daily liquid, uncorrelated alpha stream—reducing the need for large cash buffers and helping preserve return potential.
3. Liquidity: A solution that will mitigate the impact of liquidity-driven shocks, giving us full control of the fund’s architecture, cash flow and allocation management.

Growing demand for private assets

We believe demand for the option to include private assets in retirement portfolios will only continue to grow. In a recent survey of DC plan advisors, 21% said they plan to add private market investments to the plans they manage. And when asked how they’d like to deliver those investments, target date strategies came out as the top way.⁷

‘Choice’ is a critical word here. We see the choice to include private assets in retirement plans as an important part of our broader efforts to bring the full power of capital markets to all investors.

Want to see how it all comes together?

Dive deeper into how we’re approaching integrating private assets into a target date solution’s glidepath—and how we’re addressing the questions retirement plan professionals care about most.