The White House is reportedly due to finalize an executive order aiming to reduce legal uncertainty around including private equity investments retirement savings plans soon. While this development wouldn’t immediately rewrite the rules of retirement investing, it would signal a strategic shift for private market firms and unlock access to the $12 trillion + defined contribution (DC) market (source: ICI).
We are already seeing some of our private markets clients ramp up their marketing in this area, with liquid alts products and innovations in target-date funds. That said, this executive order would have game-changing implications for the way that investment products are developed and marketed. It also introduces new and fundamentally different audiences for these firms, ones that they have an obligation to engage with responsibly.
Why Private Equity in 401(k)s—and Why Now?
The case for private equity in retirement plans is gaining traction, but it’s not without complexity. Over the long term, private equity has outperformed public markets. Cambridge Associates reported a 10.48% annualized return for U.S. private equity over the 20 years ending June 30, 2020, compared to 6.69% for the Russell 2000 and 5.91% for the S&P 500. Still, these returns come with trade-offs, including limited liquidity and higher fees. Those concerns have largely kept private equity out of 401(k) plans but thanks to improved structures, liquidity profiles and fees, it appears regulators are considering carefully opening the door to broader access.
GPs should expect scrutiny should they choose to pursue inclusion in these plans and should be prepared with data-driven and jargon-free messages for both retirement plan sponsors and participants.
A Shift in Audience, a Shift in Strategy
Private equity firms traditionally engage with large and sophisticated institutions such as foundations, endowments, pensions, and sovereign wealth funds. If this reported change moves forward, they will also have to engage DC plan sponsors, financial advisors, and retirement savers, many of whom are less familiar with private markets.
This shift demands not just caution, but clarity. Messaging must be educational, accessible, and compliance-focused, while reinforcing the valuable role that private equity and credit strategies can play in diversified portfolios.
What This Could Mean for Communications Leaders at PE and Credit Managers
Here are several communications strategies we would recommend for investment firms seeking to position themselves effectively should DC plans evolve to include private markets exposure:
1. Prioritize Targeted Education
Plan sponsors and participants may not actively seek out information on private markets, but firms can build familiarity, trust, and top-of-mind awareness by proactively pushing out educational content. Strategically deliver white papers, short explainer videos, and infographics on channels where audiences are already engaged, like LinkedIn or relevant industry publications.
2. Emphasize Portfolio Diversification
For most retirement savers, private markets would represent a small portion of a broader portfolio. Communicators should frame these strategies as part of a diversified approach, rather than a standalone solution. Explain how private markets might complement public market investments over the long term with messaging that focuses on balance, diversification, and potential risk-adjusted returns.
3. Rethink Media Prioritization
Top-tier media is great for brand building, but trade media offer targeted reach. As intermediary channels become more important, outlets like Pensions & Investments, PlanSponsor, and InvestmentNews are key to reaching plan sponsors, consultants, and financial advisors. Consider a mix of bylines, interviews, webinars, and sponsored content in these publications.
4. Expand Your Event Footprint
IR and distribution teams should target conferences where DC plan sponsors and consultants gather, such as institutional retirement forums and advisor summits. For newer or smaller managers, these venues provide high-touch interactions to build brand credibility.
What Comes Next
According to reports, this executive order would instruct the Department of Labor and the Securities and Exchange Commission to provide guidance to employers and plan administrators on including private assets in 401(k) plans. That would kick off a process that would likely include opportunities for industry feedback and continued debate about how to ensure that retirement savers are protected.
Private capital firms should use this time to get ahead of the curve. Firms that invest in proactive, thoughtful engagement will not only shape perceptions but also help define the standards for how private markets are integrated into the retirement system.
Regulatory-compliant messaging that focuses on balance, diversification, and potential risk-adjusted returns will be key in giving investors the resources they need to make informed decisions about incorporating private markets exposure into their portfolios.
By Nicole Hakimi, Executive Vice President, Edelman Smithfield and Natalie Short, Senior Vice President, Edelman Smithfield