Key Takeaways
- • The Department of Labor is finalizing rule changes to expand private equity access within 401(k) retirement plans, a regulatory shift that could reshape how everyday investors allocate retirement savings.
- • Analysis by the Private Equity Stakeholder Project finds that median private equity evergreen funds—the products marketed as 401(k)-eligible vehicles—underperformed public stock market indexes in 2025 and delivered roughly half the returns of the S&P 500 over the past three years.
- • Fee structures create a significant drag on returns: major private equity evergreen funds charge annual expense ratios of 4–5 percent, compared with approximately 0.03 percent for basic S&P 500 index funds, amplifying performance shortfalls for long-term retirement savers.
- • The timing of the DOL regulatory push raises fiduciary concerns, as industry proponents pitch these private equity products as retirement opportunities for workers while performance data suggests they may underdeliver relative to lower-cost public equity alternatives.
Summary
The Trump administration's Department of Labor is advancing rule changes designed to facilitate private equity inclusion in 401(k) retirement plans, a regulatory shift that has drawn scrutiny from retirement security advocates. As federal regulators move toward finalizing these changes, new analysis from the Private Equity Stakeholder Project (PESP) directly challenges the investment case for private equity in retail retirement accounts.
The PESP analysis examines the largest private equity evergreen funds—perpetual funds typically cited by the industry as suitable models for 401(k) integration. The findings paint a stark performance picture: in 2025, median private equity evergreen funds significantly underperformed broad public stock market indexes, even before accounting for sales charges. Over a three-year period, these private equity vehicles delivered roughly half the returns generated by public equities, including the S&P 500. Jim Baker, executive director at PESP, characterized the gap as particularly problematic given the regulatory moment: "Private equity firms are pitching these products as opportunities for everyday workers, but the data suggests that some of these funds have lagged the stock market while charging fees that can significantly erode retirement savings over time."
The fee differential amplifies the performance gap substantially. The largest private equity evergreen funds charge annual expense ratios ranging from 4 to 5 percent—orders of magnitude higher than the roughly 0.03 percent charged by basic S&P 500 index funds. Over decades-long retirement accumulation periods, this fee disparity compounds into material wealth erosion. The regulatory proposal to expand 401(k) access to private equity thus raises fundamental questions about fiduciary alignment between asset managers and retirement savers at a moment when performance and fee data suggest such products may systematically underdeliver relative to lower-cost public market alternatives available within existing 401(k) frameworks.
The PESP analysis examines the largest private equity evergreen funds—perpetual funds typically cited by the industry as suitable models for 401(k) integration. The findings paint a stark performance picture: in 2025, median private equity evergreen funds significantly underperformed broad public stock market indexes, even before accounting for sales charges. Over a three-year period, these private equity vehicles delivered roughly half the returns generated by public equities, including the S&P 500. Jim Baker, executive director at PESP, characterized the gap as particularly problematic given the regulatory moment: "Private equity firms are pitching these products as opportunities for everyday workers, but the data suggests that some of these funds have lagged the stock market while charging fees that can significantly erode retirement savings over time."
The fee differential amplifies the performance gap substantially. The largest private equity evergreen funds charge annual expense ratios ranging from 4 to 5 percent—orders of magnitude higher than the roughly 0.03 percent charged by basic S&P 500 index funds. Over decades-long retirement accumulation periods, this fee disparity compounds into material wealth erosion. The regulatory proposal to expand 401(k) access to private equity thus raises fundamental questions about fiduciary alignment between asset managers and retirement savers at a moment when performance and fee data suggest such products may systematically underdeliver relative to lower-cost public market alternatives available within existing 401(k) frameworks.
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