Private Markets Belong in 401(k)s

That distinction matters, because it highlights a broader point: This is not just about private credit. It is about private investing more broadly: private equity, private real estate, private infrastructure, and whether long-term retirement investors should have access to these parts of the economy.

Structure Matters

Private investments do not belong in structures that promise daily liquidity or encourage short-term trading behavior. They belong inside diversified, professionally managed portfolios, such as collective investment trusts and the more common target-date funds, where allocations are prudent, liquidity is managed and participant outcomes are the central focus.

The Department of Labor recently took an important step forward by proposing a new framework for 401(k) investment selection that includes a clear safe harbor for fiduciaries. We view this as a meaningful and constructive development. Importantly, it is investment-neutral. It does not endorse any specific asset class but provides plan sponsors with greater clarity and confidence to evaluate a broader range of investment options based on their merits.

For too long, uncertainty around fiduciary risk has created hesitation, even when the underlying investment case is strong. By offering a clearer path for prudent decision-making, DOL is enabling plan sponsors to focus on what matters most: building well-diversified portfolios that serve the long-term interests of participants.

This does not lower the bar. If anything, it reinforces the need for discipline, rigorous due diligence, appropriate allocation sizing, strong governance and careful attention to liquidity management.

And it does remove an unnecessary barrier to innovation.

It is to continue evolving the 401(k) system so that it reflects how capital markets actually function. Public markets are only part of the story. A growing share of economic activity, and investment opportunity, resides in private markets.

Normalizing 401(k)s to the Investing Universe

Private investments are not fringe asset classes and should not be seen as such. They represent critical engines of growth and income generation. Private equity finances innovation and business expansion. Private real estate provides exposure to income-producing assets. Private infrastructure supports essential systems — energy, transportation and digital networks — that underpin economic activity. And private credit fills a structural gap in lending.

Yet access to these opportunities is largely limited to institutions and high-net-worth investors. Pension plans at home and abroad invest heavily in private markets.

That raises a fundamental question: If 401(k) participants are among the longest-term investors in the financial system, why should they be excluded?

A 401(k) is not a trading account. It is a multi-decade investment vehicle, with steady contributions and long retirement horizons.

That structure is well aligned with private markets, which are inherently long-duration investments. The mismatch we are seeing in some private credit products is not between retirement investors and private assets — it is between long-term assets and short-term liquidity promises.

Private investments can strengthen retirement portfolios, enhance diversification by expanding exposure beyond public markets and provide access to income streams — particularly in areas like private credit and real estate. And they can reduce reliance on the daily volatility of public markets.

Private investing is not a cure-all, and it is not without risk. But neither are public markets. The lesson from the current private credit headlines is not that these assets should be excluded. It is that they must be integrated thoughtfully, with structures that align with their long-term characteristics.

We should not let short-term noise derail long-term progress.

The expansion of private investments into the 401(k) system remains an important step toward improving retirement outcomes. With the right design, the right governance and a clearer regulatory framework, plan sponsors now have an opportunity to move forward in a way that is both prudent and forward-looking.

The question isn't whether private markets belong in retirement portfolios. The question is how we implement them in a way that is thoughtful, disciplined and aligned with the long-term interests of retirement savers.

Edmund F. Murphy III is the president and CEO of Empower, a retirement services company with $2 trillion in assets under administration.