Maris Research

Column: What would private equity funds in 401(k)s mean for retirement savers?

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CHICAGO (Reuters) – Employer retirement plans are not known for their flashy investments – a majority of 401(k) investors these days use target date funds that invest in broad, diversified equity and fixed income mutual funds that automatically rebalance to minimize risk as retirement approaches.

FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo

That has been a healthy, if unexciting, trend. But in the years ahead, some plan sponsors may start spicing things up. Last week, the federal government opened the door for plan sponsors to add private equity funds to their 401(k) plans. Private equity funds invest in everything from buyouts of mature non-public companies to firms getting ready to go public – and even venture capital startups. Until now, these investments have been available only to wealthy and institutional investors. 

The private equity industry has been knocking on the 401(k) door for a number of years, and the attraction is not difficult to understand. Defined contribution plans represent a huge pool of investable funds, holding $8.9 trillion in assets at the end of 2019, according to the Investment Company Institute.

Private equity proponents scored a win last week

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