REALITY
Both public and private markets offer credit, equity and hybrid investment opportunities that span the risk-return spectrum. When a professional investment manager employs modest allocations to appropriate private investments within a diversified portfolio, it may help reduce volatility and improve overall portfolio outcomes. Pension plans for teachers, firefighters and police officers have invested in private investments for decades.1
REALITY
Despite the long-term nature of their holdings, 401(k) retirement investors are largely invested in daily liquid, public index funds. For most participants, their retirement horizons are measured in decades, not months. We believe investors could be missing opportunities by keeping their long-term investments in daily-liquid funds, while avoiding the less liquid but generally higher yielding/returning investments in private markets. The professional portfolio managers, with their private asset managers, have tools to meet liquidity needs.
REALITY
When looking at net-of-fees performance, private markets have consistently outperformed public markets, increase diversification and are generally additive to retirement outcomes.2 Furthermore, by blending alpha-generating private market investments with public beta index funds, the incremental cost increase is mild given that the net-of-fees performance is enhanced.3 Additionally, institutional pricing through Collective Investment Trusts also helps to reduce costs.4
REALITY
Because private investments and guaranteed income solutions come through qualified investment professionals managing diversified portfolios on participants’ behalf, their decisions are no more difficult than selecting any other investment option. These target date funds, advisor-managed account portfolios and multi-asset fund portfolios are typically the plan’s default option.
REALITY
Private markets have outperformed their public market equivalent, across equity (in 20 of the past 24 years)5 and credit (in 13 of the past 14 years).6 Meanwhile, public markets are increasing concentrated, with only 10 stocks in the S&P 500 driving 50% of market cap growth since 2021.7 That’s the opposite of diversification.
REALITY
While net-of-fees performance is a significant factor, experience, scale and investment origination are also extremely important. The experienced private asset managers involved in 401(k) plans today are there because they can manage the operational challenges that others are just starting to consider. Furthermore, large funds backed by leading private asset managers may be better equipped to manage liquidity needs especially in challenging market conditions. Many of today’s private managers of scale have built the infrastructure required to originate high-quality investments.
REALITY
Whether evaluating private market investments or guaranteed income solutions, fiduciary responsibility requires a prudent, well-documented process. The US Department of Labor has stated that fiduciaries may consider them if they apply the same standard used for all plan investments. Further, the Collective Investment Trust and the portfolio manager are fiduciaries responsible for selecting the underlying investments. In turn, the retirement plan advisor and the plan sponsor select the portfolio investment manager. The result is multiple levels of fiduciary oversight.
The public market portfolios powering DC plans are showing signs of strain, especially given heightened market volatility and extreme concentration. These challenges can present an opportunity for DC portfolios to evolve through the integration of private market investments. Together with guaranteed income solutions, these innovations can help retirement professionals build more durable portfolios in support of stronger participant outcomes.
Please reach out if you are interested in learning more about our views, fund information or would like to request a meeting.
Sources
1 Represents the views and opinions of Apollo Analysts. Subject to change at any time and without notice.
2 Sources: Preqin, Apollo Chief Economist. Private equity data reflects period from December 31, 2000 through December 31, 2025. Private equity asset class defined as: balanced, buyout, co-investment, co-investment multi-manager, direct secondaries, fund of funds, growth, secondaries and turnaround. Private credit data reflects period from September 30, 2010 through December 31, 2025. Private credit asset class defined as direct lending.
3 Source: Preqin, data as of December 31, 2025.
4 https://www.cerulli.com/resource/custom-research-unlocking-the-potential-of-private-investments-in-defined-contribution-plans
5 Sources: Preqin, Apollo Chief Economist, data reflects period from December 31, 2000 through December 31, 2025. Private equity asset class defined as: balanced, buyout, co-investment, co-investment multi-manager, direct secondaries, fund of funds, growth, secondaries and turnaround.
6 Sources: Preqin, Apollo Chief Economist, data reflects period from September 30, 2010 through December 31, 2025. Private credit asset class defined as direct lending.
7 https://www.apolloacademy.com/extreme-concentration-in-the-sp-500-3/
All information contained in this material is as of September 2026 unless otherwise indicated.
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