BlackRock Integrates Private Equity and Credit into 401(k) Funds

On June 26, 2025, reported by WSJ Markets, BlackRock announced a bold move set to disrupt traditional retirement investing. The investment giant revealed its plan to introduce private investments into its newly structured target-date fund, which will be made available within 401(k) plans. For decades, private market assets like private credit and equity were limited to institutional investors and ultra-high-net-worth individuals. This new approach, however, will give everyday retirement savers access to these same opportunities.

BlackRock sees this change as potentially having a significant long-term influence on retirement portfolios. Their research shows that adding private investments into a 401(k) structure could provide approximately 0.5% per year in additional annual returns. Although on the surface this may not seem like a lot, over 40 years, it could equate to as much as 15% more in total retirement savings assuming compounding. As employers and plan sponsors seek ways to bolster retirement outcomes without risking additional investment risk, this move towards a more diversified investment offering could be the next evolution.

Why BlackRock is Introducing Private Investments into Retirement Portfolios

BlackRock is the first major firm to advocate for significant private investments to be included in the 401(k) model. The upcoming target-date fund will be launched in early 2026 and will be managed by the Great Gray Trust Company. The fund will contain a public market investment section and include private assets, such as private credit and equity. The unique architecture of the fund is structured so that younger investors will have higher allocations, between 15% and 20%, in the private investments. Investors’ allocations will gradually reduce to around 5% to 10% as they near retirement age. 

The fund was designed to seek the benefits of diversification with the appropriate risk opportunity. Rather than being restricted to public stocks and bonds, the fund will have asset classes that act in ways different than during changing market conditions. For example, during a bear market or contraction, private investments historically change in ways different than public equities. The fund aims to provide enhanced return potentially while mitigating total volatility. BlackRock argues that access to private markets for plan participants was not based merely on growth, but it was about constructing more resilient retirement portfolios.

How the Target-Date Fund Will Function Inside 401(k) Plans

Target date funds are already prevalent in retirement savings, controlling more than 60% of all 401k assets. These funds shift and glide the allocation mix of stocks, bonds, and now including private investments, based on how close the saver is to retirement. In the BlackRock example, younger participants will likely be allocated more private investments and then as a saver gets closer to retirement, that allocation will appropriately decrease.

To solve the liquidity issues associated with private investments, BlackRock now has a fund with publicly traded assets providing necessary liquidity. Daily liquidity occurs through its public traded assets, while its private investments are intertwined in way that provides flexibility and access. Expense ratios for the entire fund is expected to average 0.38%, which is quite good for a fund holding complex asset classes.

Addressing Challenges and Industry Concerns

While there are many questions that will take time to fully address in a fiduciary context, there already are a number of complexities and challenges facing the expanded use of private funds in 401(k) plans. Among the greatest concerns is valuation. Unlike publicly traded stocks or mutual funds, private funds are not priced in real time as they do not trade publicly. It can prove difficult to determine value at any moment in time. In addition, these are illiquid investments and often involve longer lock-up periods. This could make employers reticent to utilize such funds in their plans, especially if they are held to fiduciary standards. Fee transparency also can be a factor in the uptake of private funds in plans. 

Concern over fees and structures remains with industry observers and other critics categorizing any added complexities this introduced could be too much risk or ambiguity for plan actuaries and sponsors to take on for plan participants. Yet despite the challenges associated with these funds, BlackRock executives, including CEO Larry Fink, remain bullish on the future for these private funds as best practice in retirement investing. They argue providing access to private markets democratizes new methods for creating and building wealth and provides access to more thorough and sophisticated investing strategies for the average investor.

A Broader Industry Shift Toward Private Markets

BlackRock’s move is part of a larger industry trend. Other major financial players like State Street and Empower are also working on bringing private assets into mainstream retirement accounts. State Street has already launched private equity-infused funds, and Empower plans to introduce private real estate and private credit into their products later this year.

This movement is supported by BlackRock’s strategic acquisitions in recent years. The firm acquired HPS Investment Partners and Global Infrastructure Partners to bolster its presence in the private asset space. It also purchased Preqin, a data firm specializing in private markets, to help provide the transparency needed to manage these investments effectively. The long-term goal is to make private investments more indexable, trackable, and accessible within regulated retirement plans like 401(k)s.

What This Means for Everyday Retirement Savers

Ultimately, the success of BlackRock’s initiative will depend primarily on the willingness of employers to engage in the added complexity as they chase the prospect of improved returns and increased benefits for their employees. If employers do embrace the additional complexity, retirement savers could see a significant enhancement in the way their portfolios grow and evolve over time. There is an ongoing attention to operating complexities associated with investment fees, liquidity and transparency. 

We see a slight opening for a broader range of potential wealth-building instruments that have been off-limits to most Americans historically. For now, BlackRock is laying the groundwork. Its belief is clear: the retirement system of the future should look more like an institutional portfolio, diverse, strategic, and positioned to weather different market environments. If successful, this plan could mark one of the most significant changes to 401(k) plans in recent history.