Chances are very good that your 401(k) does not currently offer you access to private equity investments, which, as the name implies, are investments in companies that are not publicly traded.

The question is, will that change in the next few years? And, if it does, is it worth it for you to invest?

Large company pension plans and university endowments — both of which have very long time horizons — have invested for years in private equity and private debt funds. But 401(k)s typically haven’t offered those options to plan participants. In November 2024, only 2.4% of 401(k) sponsors said they added a private equity investment option to their plan, according to a weekly poll question from the Plan Sponsor Council of America.

That may be because employers are afraid of potential lawsuits if they include those options, which typically charge investors more than investment funds in public companies. And under the Employment Retirement Security Act (ERISA), employers have a fiduciary duty to ensure that investment options in your 401(k) are prudent and have reasonable fees, said Jerry Schlichter, founding partner of Schlichter Bogard, who pioneered lawsuits against plan sponsors for charging excess 401(k) fees.

It also may be because private assets are riskier to invest in and information about them is opaque, since they’re private. So there is less of a requirement to be transparent with investors about how a fund is doing on a regular basis.

In addition, private capital options are considered illiquid investments because you can’t take your money out whenever you want. And that may prove too constraining for retirement plan participants, who may need access to their 401(k) money for any number of reasons — including changing or losing a job, Schlichter said.

There has been an increasing push to provide more private capital investment opportunities for retail investors and participants in workplace retirement plans like 401(k)s and 403(b)s.

On the regulatory front, according to Jaret Seiberg, a financial services policy analyst at TD Cowen Washington Research Group, the Trump administration is likely to make it easier to access so-called alternative investments, which include private equity, private real estate and hedge funds.

That could result in an executive order from the president requiring government agencies to expand access to such investments as well as rulemaking or guidance from the Department of Labor — which enforces ERISA — “to expand the ability of individuals to invest in 401(k) and IRA accounts in alternative investments,” Seiberg said in a daily research note.

There are far fewer public companies today than there were 30 years ago, as more companies remain private.

For that reason, some say, if investors want to own the whole market and have a truly diversified portfolio, where some asset classes move up when others move down, they should have access both to public and private companies.

In a recent conversation with Morningstar, BlackRock chief operating officer Robert Goldstein noted that the performances of publicly traded stocks and bonds have become more correlated than they used to be, and “many of the less correlated assets are only accessible through the private markets.”

That may be. Or not. For average retail investors, it could be hard to tell because there currently isn’t a centralized way to track the performance and underlying investments of private capital funds and directly compare them to that of the stock and bond funds and indexes they’re used to.

That’s just one reason why other market watchers and investor advocates worry about expanding access to private capital for average retirement savers.

Among those squarely in the camp of those who say employee and retiree nest eggs won’t be helped — and could be harmed — by having exposure to private capital is Benjamin Schiffrin, director of securities policy at Better Markets, a nonprofit seeking to promote the public interest in financial markets.

“Why is there a push to open up the private markets to 401(k)s now? It’s not because workers want less liquid and harder-to-value assets in their 401(k)s. And it’s not motivated by plan sponsors, who have long worried that exposing 401(k) plan participants to private market assets would violate their fiduciary duty to act in the best interest of the investors,” Schiffrin said in a statement. “It’s because private market firms are finding it harder now to raise money. Their traditional sources of funding — institutional investors such as pensions and endowments — have evaporated.”

Indeed, for plan sponsors, including private equity among their plan’s investment options will require a lot more due diligence from them in terms of investigating the underlying investments in a given fund and examining the fee structure, Schlichter said. “This is fraught with danger. A company that puts private equity in its 401(k) is undertaking a serious risk of breaching its fiduciary duty.”

Credit ratings agency Moody’s this week put out an analysis, first reported by the Wall Street Journal, which cautioned that the accelerated push to give private capital firms access to the multitrillion-dollar retirement investment industry holds risk for everyone.

“Competition for retail investor capital within private markets will intensify as alternative asset managers roll out new partnerships and special funds to address this potentially vast, still largely untapped market,” the analysts wrote. “But rapid growth within this still relatively opaque market also carries systemic implications.”

One example, they cited, is the potential for a liquidity crisis. “Unlike institutional investors, retail investors expect ready access to their cash. To help, managers are launching products with periodic windows of liquidity. But in volatile markets, retail investors may run for the exits, which would exacerbate liquidity needs and the risk of potential mismatches between a product’s available liquidity and what investors are expecting.”

The promise of investing in private equity is that the additional expense and risk assumed by investors can be rewarded with potentially strong returns over time.

While it’s hard to easily and quickly track private equity performance on your own, there have been academic and industry studies on it, and the results have been mixed, said Jason Kephart, senior principal for multi-asset strategy ratings at Morningstar.

So, while you will likely pay more and have less transparency into what you’re investing in, having a stake in private capital is no guarantee that you will enjoy meaningfully better returns in your portfolio.

As for the diversification argument, Kephart said, it’s worth remembering that just as with public companies, private companies’ performance will be affected by external forces such as economic downturns, interest rates, geopolitical concerns, tariffs and supply chain issues.

“Being private doesn’t shield you from the world,” he noted.

And, Kephart added, “It’s not like the public markets are broken. Public stocks and bonds have paid off pretty well for those who’ve stayed invested.”