BlackRock wants more private market exposure in defined contribution retirement plans, arguing that private equity improves diversification and returns.

Currently, private assets make up less than 1% of 401(k)s and similar plans, but major asset managers see room for growth.

Speaking at a BlackRock-sponsored retirement summit, CEO Larry Fink called blending public and private investments a “great investment” strategy. BlackRock, which manages $11.6tn in assets, believes private markets add diversification as public company listings decline and private equity-backed firms expand.

Ed Murphy, CEO of Empower, the second-largest U.S. retirement services provider, supports adding private assets through target-date funds, managed accounts, or collective investment trusts rather than standalone options. He stressed that structuring these investments properly could reassure employers and plan sponsors.

Private equity offers higher returns but comes with challenges, including high fees, limited liquidity, and volatility. Olivia Mitchell, executive director of the Pension Research Council at the University of Pennsylvania, noted that these risks may not suit individuals nearing retirement.

Employers managing 401(k) plans must act in participants’ best interests, ensuring investment options are appropriate and fees remain reasonable. Some experts warn that the complexity of private market investments could make this responsibility more difficult.

BlackRock is working to address these concerns. The firm recently acquired private market data provider Preqin and plans to enhance transparency and analytics to help investors assess risk. Fink believes better data and insights could convince regulators to approve private assets for retirement plans.

“If we achieve that, then I think we’re going to have a credible opportunity to add these types of instruments to retirement products,” he said.

As private equity firms push for inclusion in retirement plans, regulatory scrutiny and fiduciary concerns will determine how quickly these investments gain traction.