KVIG Informative

For most of its history, venture capital and private equity were available only to institutional investors and the very wealthy. That is changing. Regulatory shifts and executive orders are pushing to open private markets to 401(k) holders and retail investors for the first time. The industry sees $900 billion in new capital within reach. The question nobody in the marketing materials is answering: what happens when ordinary retirement savings get locked up the same way pension funds are?

Private equity firms are not subtle about what they want. The fastest-growing pool of untapped capital available to the industry is the wealth held by ordinary American households — in savings accounts, in brokerage accounts, and most of all, in the $10 trillion sitting inside 401(k) retirement plans. Boston Consulting Group estimates that global wealth investors could add $3 trillion of private markets investments between 2024 and 2030. Cambridge Associates projects that regulatory easing could add a further $900 billion from U.S. 401(k)s alone.

The door is being opened. A Trump administration executive order directed the Department of Labor to expand access to private investments through defined contribution plans — which includes 401(k)s. The order represents a significant policy shift. For decades, retirement plan regulations have effectively restricted plan administrators from offering private equity or venture capital as investment options, on the grounds that these assets are illiquid, hard to value, and carry risks inappropriate for retirement savers who cannot afford to lose their principal. The executive order asks regulators to reconsider that framework.

The industry is moving quickly to meet the new opening. PE firms are racing to launch ‘40 Act vehicles” — investment products structured under the Investment Company Act of 1940 that can be sold to retail investors without the accredited investor requirements that have historically restricted private market access. The top ten such funds combined managed less than $60 billion as of early 2025, a fraction of the private credit and equity markets overall, but the category is growing as more managers see the wealth channel as their next major source of capital.

The case the industry makes for retail access is straightforward. Private equity has historically outperformed public markets over long time horizons. If that outperformance is real, ordinary savers deserve access to it just as much as university endowments and sovereign wealth funds do. The argument has surface appeal. It is also the argument being made by the people who will collect management fees and carried interest on every dollar of retirement savings that flows into their funds.

The risks are structural and they are serious. Private equity investments are illiquid by design. A pension fund that allocates 10 percent of its portfolio to private equity has the scale and the investment horizon to absorb years of locked-up capital while waiting for an exit. A 55-year-old worker whose 401(k) is invested partly in a private equity fund that cannot produce a return for seven years because the IPO market is closed has a different problem. The liquidity mismatch between private equity fund timelines and the needs of individual retirement savers is not a technicality. It is the central risk that decades of regulation was designed to manage.

There is also the valuation problem. Private companies do not have daily market prices the way publicly traded stocks do. Their valuations are set periodically by their managers, using models that involve significant judgment. In an environment where 1,900 unicorns are sitting on $3 trillion in unrealized value with no clear exit path, the question of whether those valuations reflect what investors would actually receive in a sale is not theoretical. It is the question that limited partners at major institutional funds are already wrestling with. Retail investors, who have less access to information and less ability to negotiate terms, are in a weaker position to assess that risk.

None of this means that opening private markets to retail investors is necessarily wrong. It means the argument deserves more scrutiny than it is currently receiving in the coverage of this expansion. The industry’s pitch is access and returns. The fine print is illiquidity, opacity, and a fee structure that ensures managers profit regardless of whether individual investors do. The regulatory framework that kept 401(k) plans out of private equity for decades was not an accident. Whether dismantling it serves ordinary retirement savers, or primarily serves the firms looking for $900 billion in new capital to manage, is a question worth asking before the money moves.