Key Takeaways
- • Private equity evergreen funds analyzed by the Private Equity Stakeholder Project (PESP) delivered a median return of 11.20% in 2025, significantly underperforming the S&P 500 (17.43%) and MSCI ACWI global equity index, despite being marketed as potential 401(k) investment vehicles.
- • Only one of 15 large evergreen funds examined outperformed broad public equity benchmarks, raising questions about the suitability of private equity for retail retirement accounts during a period when federal regulators are considering rule changes to expand alternative investment access in 401(k)s.
- • Major private equity managers including Apollo, Blackstone, KKR, Carlyle Group, and Ares Management operate the evergreen funds studied, which are actively being pitched to everyday workers as retirement investment opportunities despite performance gaps and high fee structures.
- • PESP warns that high sales charges and ongoing fees associated with private equity investments can significantly erode retirement savings over time, compounding the drag created by already-lagging returns relative to passive equity benchmarks.
- • The underperformance extends beyond 2025 performance data, with private equity evergreen funds demonstrating median annualized returns consistently below broader market indexes according to PESP's historical analysis.
Summary
New research from the Private Equity Stakeholder Project (PESP), a nonprofit organization, has challenged the narrative surrounding private equity inclusion in 401(k) retirement plans at a critical regulatory juncture. As federal officials prepare to release proposed rules addressing fiduciary duties for alternative investments in 401(k)s, PESP's analysis of the largest private equity "evergreen" funds—vehicles often cited by the financial services industry as models for retail retirement inclusion—reveals significant performance shortfalls relative to public equity benchmarks.
The study examined funds managed by major industry players including Apollo, Blackstone, KKR, Carlyle Group, and Ares Management. In 2025, the median return across these funds stood at 11.20%, substantially below the S&P 500's 17.43% return and the MSCI ACWI global equity index's performance. Critically, only one of the 15 large evergreen funds analyzed outperformed broad public equity indexes. These returns were measured before accounting for sales charges, meaning actual investor outcomes would be further diminished once fees are factored in.
Jim Baker, PESP's executive director, emphasized the implications: "These findings raise serious questions for retirement savers at a moment when federal regulators are considering changes that could open the door wider to private equity in 401(k)s. 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 performance underperformance is not isolated to a single year. According to PESP's findings, private equity evergreen funds have delivered consistently mediocre median annualized returns across the historical period examined. The combination of fee drag and below-market returns presents a particular concern for retirement savers with long investment horizons, where compounding effects amplify the impact of underperformance. The research arrives as policymakers consider regulatory reforms that could expand private equity accessibility to 401(k) plan participants, suggesting any such changes warrant careful consideration of fiduciary obligations and investor suitability standards.
The study examined funds managed by major industry players including Apollo, Blackstone, KKR, Carlyle Group, and Ares Management. In 2025, the median return across these funds stood at 11.20%, substantially below the S&P 500's 17.43% return and the MSCI ACWI global equity index's performance. Critically, only one of the 15 large evergreen funds analyzed outperformed broad public equity indexes. These returns were measured before accounting for sales charges, meaning actual investor outcomes would be further diminished once fees are factored in.
Jim Baker, PESP's executive director, emphasized the implications: "These findings raise serious questions for retirement savers at a moment when federal regulators are considering changes that could open the door wider to private equity in 401(k)s. 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 performance underperformance is not isolated to a single year. According to PESP's findings, private equity evergreen funds have delivered consistently mediocre median annualized returns across the historical period examined. The combination of fee drag and below-market returns presents a particular concern for retirement savers with long investment horizons, where compounding effects amplify the impact of underperformance. The research arrives as policymakers consider regulatory reforms that could expand private equity accessibility to 401(k) plan participants, suggesting any such changes warrant careful consideration of fiduciary obligations and investor suitability standards.
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