Key Takeaways
- • Ohio's Public Employees Retirement System is reducing private equity allocations due to high fees and declining performance, signaling institutional investor skepticism toward the asset class.
- • Large private equity funds underperformed global equity markets significantly in the most recent period: growing at 11.2% versus the MSCI AWCI Index at 22.34%, and lagging the S&P 500 by 36% (17.43% growth).
- • President Trump signed an executive order in August 2025 creating "safe harbors" for retirement plan managers to invest 401(k) funds in alternative assets including private equity, crypto, and real estate—explicitly designed to shield fund managers from investor lawsuits.
- • The policy divergence reflects a fundamental tension: public pension funds are retreating from private equity due to cost and performance concerns, while the Trump administration is expanding retail investor access to these same investments through reduced fiduciary protections.
- • The Private Equity Stakeholder Project reports that 15 large PE firms significantly underperformed traditional public market indices, raising questions about the risk-return profile being offered to 401(k) investors through the new regulatory framework.
Summary
Ohio's Public Employees Retirement System is backing away from private equity investments as concerns mount over excessive fees and subpar returns—a move that contrasts sharply with the Trump administration's effort to broaden access to these assets for ordinary Americans saving through 401(k) plans.
The Ohio pension fund's retreat signals growing institutional skepticism. According to the Primary source, the fund cited high fees and declining performance as drivers of the reduction. This skepticism is supported by recent performance data: the Private Equity Stakeholder Project found that 15 large private equity funds grew at approximately half the rate of the MSCI AWCI Index last year. Specifically, major PE firms achieved 11.2% growth while the global index reached 22.34%—a substantial performance gap. The underperformance relative to domestic markets was even more pronounced: large PE funds lagged the S&P 500 by 36%, with the broad market index delivering 17.43% growth.
Simultaneously, President Trump signed an executive order in August designed to facilitate retail investor access to private equity and other alternative investments within 401(k) plans. The order explicitly frames this as "democratizing access to alternative assets," but its mechanism involves creating legal "safe harbors" that protect fund managers from investor lawsuits. According to Trump's executive order language cited in the source, the administration justified the move by arguing that "regulatory overreach and encouragement of lawsuits filed by opportunistic trial lawyers has stifled investment innovation" and prevented ordinary retirement savers from accessing the same asset classes available to institutional investors and public pension plans.
This policy shift creates a striking disconnect: institutional pension funds managing trillions in assets are reducing exposure to private equity precisely as regulations are being relaxed to funnel individual retirement savings into the same investments. The timing raises concerns about whether retail investors are gaining access to an asset class that institutional investors—with superior resources and expertise—are actively de-risking. The divergence underscores a fundamental question about the alignment of interests between asset managers seeking to expand capital sources and fiduciaries responsible for retirement security.
The Ohio pension fund's retreat signals growing institutional skepticism. According to the Primary source, the fund cited high fees and declining performance as drivers of the reduction. This skepticism is supported by recent performance data: the Private Equity Stakeholder Project found that 15 large private equity funds grew at approximately half the rate of the MSCI AWCI Index last year. Specifically, major PE firms achieved 11.2% growth while the global index reached 22.34%—a substantial performance gap. The underperformance relative to domestic markets was even more pronounced: large PE funds lagged the S&P 500 by 36%, with the broad market index delivering 17.43% growth.
Simultaneously, President Trump signed an executive order in August designed to facilitate retail investor access to private equity and other alternative investments within 401(k) plans. The order explicitly frames this as "democratizing access to alternative assets," but its mechanism involves creating legal "safe harbors" that protect fund managers from investor lawsuits. According to Trump's executive order language cited in the source, the administration justified the move by arguing that "regulatory overreach and encouragement of lawsuits filed by opportunistic trial lawyers has stifled investment innovation" and prevented ordinary retirement savers from accessing the same asset classes available to institutional investors and public pension plans.
This policy shift creates a striking disconnect: institutional pension funds managing trillions in assets are reducing exposure to private equity precisely as regulations are being relaxed to funnel individual retirement savings into the same investments. The timing raises concerns about whether retail investors are gaining access to an asset class that institutional investors—with superior resources and expertise—are actively de-risking. The divergence underscores a fundamental question about the alignment of interests between asset managers seeking to expand capital sources and fiduciaries responsible for retirement security.
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