Same Structural Challenges, Greater Potential Consequences

Private equity inside a 401(k) raises familiar but amplified challenges. Long investment cycles, limited redemption options, and opaque valuations characteristic of PE funds sit awkwardly within plans designed for daily liquidity and transparent pricing. High “2 and 20” fee structures also contrast sharply with the 0.26% average expense ratio typical of 401(k) equity funds.

For RIAs and plan sponsors, these concerns aren’t new一but the stakes could be. Plan sponsors and their advisers will still need to justify every selection under the same prudence and loyalty tests一meaning the practical hurdle isn’t legality, it’s demonstrating participant benefit within inherently illiquid structures.

What About PE Returns? 

Less Tailwind, More Headwind

Private markets have historically outperformed public equities over long periods, particularly from the 1980s through the mid-2010s, when favorable financing conditions and robust exit markets amplified returns.

But that advantage has narrowed sharply in recent years. Higher borrowing costs, slower exits, fewer public companies, and only a modest IPO recovery since 2022 have constrained returns and helped reduce the performance premium that once defined the asset class.

Surging Public Markets

That said, the private-public return gap may owe less to weak private performance than exceptional public-market gains in recent years, fueled by AI-driven rallies and the dominance of public mega-cap technology stocks.

AI-linked companies have accounted for roughly 80% of U.S. stock-market gains in 2025 (as of 10-6-25), and the Magnificent Seven make up about 38% of the S&P 500 (as of 10-29-25)—a level of concentration not seen in decades.

State Street’s Q2 2025 Private Capital Index shows private capital up 4.16% for the quarter—its strongest since 2021—but trailing the S&P 500 (10.94%) and Russell 2000 (8.50%). Across one-, three-, five-, and 10-year horizons, private markets now lag public equities.

For RIAs: Patience & Precision

Regulatory flexibility will likely expand opportunity, but execution will be slow and scrutiny high. Structural frictions一illiquidity, opaque valuations, and high costs一remain, and recent performance trends don’t yet make a compelling case for haste. 

For RIAs, it’s possible the differentiator won’t be early adoption; it’s more likely to be disciplined due diligence: understanding liquidity terms, valuation methods, and fee layering. The task is to weigh whether private-market exposure truly enhances diversification and return potential or merely adds complexity. 

Those who can explain when alternatives serve participant interests一and when they don’t一will likely be better positioned once these products finally arrive.

“The AI spending cycle has legs, maybe not forever, but certainly through next year. The earnings power just keeps proving itself.”

一 Timothy Reilly, President

Nvidia at $5T: Peak Power or Just the Beginning?

Is Nvidia really a $5T company—or a hot streak waiting to cool?

This Reuters deep dive asks what truly powers Nvidia’s run (hyperscaler AI spend, CUDA moat, Blackwell cycle) and what could crack it (supply, customers, rivals). Read to judge whether Nvidia’s edge is durable—or overhyped.