Private Equity Breaks Into Your 401(k): What Savers Need to Know

Private equity (PE) and private credit long hid behind velvet ropes—ill-liquid partnerships, multi-year lock-ups, and million-dollar minimums. That exclusivity is cracking. On July 18 2025, reports say President Trump will sign an executive order directing regulators to strip away barriers so 401(k) plans can allocate to alternatives such as private equity, private credit, gold, and even crypto—potentially unleashing trillions of retirement dollars into private-markets.

ETFs Bringing Private Markets to the Masses

While plan sponsors hash out implementation, three exchange-traded funds already give listed on-ramp exposure—each with a distinct twist on accessing private assets:

Invesco Global Listed Private Equity ETF (PSP) – Launched in 2006, PSP owns publicly traded PE firms and business-development companies (BDCs). It carries a 1.79 % net expense ratio and is up 10.66% YTD, with roughly $323 million in assets.

VanEck BDC Income ETF (BIZD) – A pure BDC basket that channels private loans to middle-market companies. Robust yields have helped drive 6.63 % YTD returns and $1.66 billion in assets—but “acquired fund fees and expenses” push its all-in cost to 12.86 %.

SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) – Debuted Feb 26 2025 with Apollo sourcing direct loans. It charges 0.70 % and manages about $139 million.

Why PE & Private Credit ETFs Could Thrive in 401(k)s

Performance Potential: Long-term PE has historically outpaced public-equity indexes, while private credit offers yields north of 9 %. Wrapping those themes in a liquid ETF provides daily pricing—vital for defined-contribution plans.

Diversification: Cash-flow-heavy loans and uncorrelated buy-out proceeds can dampen equity-market drawdowns, potentially smoothing retirement balances when volatility spikes.

Trade-Offs to Consider—Before You Hit “Enroll”

High Fees Eat Returns. PSP’s 1.79 % and BIZD’s eye-watering 12.86 % expense ratios far exceed the sub-0.10 % costs of broad-market index funds, meaning the illiquidity premium must be large—and persistent—just to break even.

Indirect, “Listed-but-Not-Liquid” Exposure. Most “private equity” ETFs actually hold shares of publicly traded asset managers or BDCs rather than stakes in the underlying portfolio companies, so the diversification benefit may be thinner than the marketing suggests.

Valuation Lags and Liquidity Mismatch. Level-III private credit positions are priced by models, not markets; in a rush to the exits, managers may rely on cash buffers or bank lines—risks most 401(k) savers seldom face in core stock-and-bond funds.

Regulatory Uncertainty. The SEC still caps ETFs at 15 % illiquid holdings, and the Department of Labor must translate the executive order into fiduciary guidance—so exposure limits and implementation timelines remain fluid.

Bottom Line

Opening 401(k) menus to private markets could reshape retirement investing—giving everyday savers a bite of Wall Street’s higher-return pie. ETFs like PSP, BIZD, and PRIV provide a liquid bridge, but richer fees, indirect exposure, valuation quirks, and evolving rules demand caution. Investors with long horizons and a taste for complexity might consider small, diversified allocations; everyone else should watch how regulators finalize the details before jumping in.

Private-equity ETF showdown, check them side by side with our