Episode summary
S3 | Episode 4: Private Markets Are Coming For Your 401(k)
Capital Decanted
· · Guests: Drew Carrington, Dan Cahill
Summary
Private markets in 401(k)s are framed here as a policy and portfolio debate, not just a product rollout. The hosts argue that Washington’s 2025 executive order may have opened the door to private equity, private credit, infrastructure, and real estate in defined contribution plans, but access alone does not solve the harder issues of governance, liquidity, participant behavior, and investor protection. They also emphasize that the debate is not really black and white: the industry’s push for broader access is partly about inclusion, but it is also arriving amid higher rates, crowded fundraising, and strong incentives for asset managers to find new capital.
A big part of the discussion is a skeptical review of performance claims. The episode walks through studies on both sides, concluding that returns can be made to say almost anything depending on the time period, benchmark, fee treatment, or whether one is measuring GP or LP outcomes. The strongest evidence cited is a long-run academic study showing meaningful direct alpha in private equity, private debt, and infrastructure, but the hosts also note that recent 1-, 3-, and 5-year results have weakened.
The more important argument, though, is structural. The guests compare U.S. plans with Australia, the UK, and the Netherlands, showing that systems that successfully use private markets usually sacrifice some personal control in favor of institutional-style governance and centralized investment expertise.
Key takeaways
- The hosts argue that the real question is not whether private markets are fashionable, but whether 401(k) systems can safely handle illiquidity and complexity at scale.
- Drew Carrington says the industry is still in “spring training” on access, and that most workers have not yet been able to use private markets in DC plans.
- John Bowman says performance studies are often misleading because they mix periods, benchmarks, and return methodologies in ways that can support almost any conclusion.
- The episode highlights a 2025 academic study finding about 400 basis points of annual private-equity direct alpha over 1998-2023, but also notes recent weakening in 1-, 3-, and 5-year excess returns.
- Carrington argues the useful comparison is not just products, but system design: Australia, the UK, and the Netherlands all trade off participant control for institutional-style investing.
- The hosts say the strongest case for private markets in retirement plans is not only higher returns, but better exposure to the parts of the economy where value creation now happens.
Notable quotes
“People say that we are in the early innings of this effort to bring private markets to define contribution. It's even earlier than that”
“I think the place to start is rather than we're trying to solve a very specific problem, it's a more general problem, which is institutional investors across the globe”
How the episode opens
So Dan, before we even get into product development or plan design or the options that are available to participants, I think it's helpful to take a step back and just tell us where we're at in this whole journey. This seems to have really picked up steam in the news over the last 18 months or so. But if you were to take a look at where we're at today versus where we're going in the future, where are we in that life cycle?
People say that we are in the early innings of this effort to bring private markets to define contribution. It's even earlier than that. I think we're still in spring training in terms of making sure people understand exactly what they can access and how.
Partners Group's been at the forefront of making sure that we understand and we can educate our clients on what they have access to. But we're at the early innings in terms of adoption because the masses have not been able to take advantage. As we've talked about, it's only the most sophisticated and well-resourced plans that have been able to provide access to private markets.
And that's what this administration is keenly focused on. One is what's the most effective way to allow fiduciaries to make the best decision on behalf of their participants. One thing is clear, this might not be for everybody, but it has to be up to the fiduciary to decide on behalf of the plan and plan participants whether or not that's the case.
And I know that Department of Labor is working towards the February deadline for the executive order. A large piece of that will be how do we make it so that these asset classes which are the majority of investment opportunity out there given the state of public markets.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private markets
- 401(k)
- illiquidity
- pension governance
- participant behavior
Companies and tickers mentioned
- iCapital
- Partners Group
Watch the episode
Watch “S3 | Episode 4: Private Markets Are Coming For Your 401(k)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Capital Decanted, this episode and its artwork belong to John Bowman. Octagon is not affiliated with the show; this page is an independent summary.
