Part 14/17:
The executive order opening private equity to retail investors via 401(k) plans raises the stakes further. The rationale is to broaden diversification and offer higher returns, but critics warn that private equity's high fees, illiquidity, and opaque valuation practices make it unsuitable for unsophisticated investors. Private equity funds often charge management fees in the range of 2% and performance fees ("2 and 20"), eroding investor returns.
Industry lobbyists—and some companies—argue that excluding private assets from retirement plans breaches fiduciary duties. They claim that higher returns from private equity justify its inclusion. However, the industry’s push seems more motivated by the hunt for new capital than by client benefit.