Edward Siedle: Public Pensions Paved Highway To Hell Driving 401k Investors Into Private Equity

Pension Warriors 

By Edward Siedle
July 25, 2025

Public Pensions Paved Highway To Hell Driving 401k Investors Into Private Equity

Retail investors deserve access to the same high-performing asset classes as trusted institutional investors, says the private equity industry.

Yes, America, there is a strong connection between state and local pensions’ decades-long embrace of private equity and the current push to include private equity in individual retirement plans like 401(k)s. Decades of public pensions misleading stakeholders, including taxpayers and retirees, about the risks and rewards related to private equity, has set the stage for private equity to pitch 401k plans—using decades of bogus data created by public pensions.

By way of background, over the past 20+ years, public pensions, under pressure to meet high assumed returns (often ~7%), have embraced private equity for its historically higher reported returns versus public markets. These funds have universally underreported risks and fees (especially performance fees) and overstated investment performance by accepting rosy valuations from private equity managers. For example, CalPERS and CalSTRS, two of the largest U.S. pension funds, have consistently increased private equity allocations, citing its return potential—even while acknowledging challenges in fee transparency and liquidity.

Decades of public pensions misleading stakeholders, including taxpayers and retirees, about the risks and rewards related to private equity, has set the stage for private equity to pitch 401k plans—using decades of bogus data created by public pensions.

 Starting in the late 2010s and early 2020s, there was regulatory and industry push to bring private equity into 401(k)s. In 2020, under the Trump administration, the DOL issued guidance allowing private equity to be part of diversified funds (e.g., target-date funds) in 401(k) plans. The move followed intensive lobbying by private equity firms, asset managers, and some pension industry groups. The rationale provided was that private equity can boost long-term returns and provide diversification.

In other words, if it's good enough for CalPERS, NYSTRS, and other large institutional investors, why not for individuals?

So, public pension embrace helped legitimize private equity and decades of normalization (with attendant bogus risk, expense and performance reporting) have now laid the groundwork to bring PE to do its “magic” for 401k investors.

“Let the little investor have all the advantages previously reserved for the most sophisticated, wealthy investors.”

“Trusted institutional investors have relied on PE for decades,”

“Retail investors deserve access to the same high-performing asset classes.”

Don’t fall for it: This is an effort by private equity firms and financial institutions to tap a massive new pool of retail capital. Private equity firms need new capital sources, as public pensions reach allocation limits and markets mature.

Introducing the profound risks private equity poses—risks which even the nation’s largest institutional investors have failed to comprehend, much less master, over the past two decades—to people least able to bear them, is beyond reckless.

And now that DOL has rescinded its previous guidance advising fiduciaries to exercise “extreme care” before including cryptocurrency options in 401ks, the Highway to Hell is getting more dangerous than ever.