30 September 2026
Private markets are moving closer to individual retirement savings. As policymakers and pension providers consider giving defined contribution plan participants greater exposure to private equity, private debt, infrastructure, real estate and venture capital, the debate often focuses on a simple question: can these assets improve retirement outcomes?
New research from the CFA Institute Research and Policy Center suggests that the answer is more nuanced. Private-market allocations can improve risk-adjusted performance in retirement portfolios, but the outcome varies considerably depending on the asset class selected and the role it is expected to play. Just as importantly, how a retirement plan is designed can influence the final outcome as much as, or even more than, the decision to invest in private markets itself.
Published in September 2026, Private Markets in Retirement Plans: Returns, Risks, and the Importance of Plan Design, by Raymond Ka-Kay Pang, PhD, and Fan Yang, examines private-market investing through the specific lens of defined contribution (DC) retirement plans.
From defined benefit to individual responsibility
The starting point is a structural transformation in retirement provision. The shift from defined benefit to defined contribution schemes has progressively transferred investment and longevity risk from employers to individuals. Under a DC system, retirement adequacy depends increasingly on contributions, asset allocation, fees and realised investment performance.
This has encouraged interest in moving beyond traditional combinations of listed equities and bonds. Private markets potentially offer additional sources of return and diversification, but they also introduce challenges that are less pronounced in public markets, particularly around liquidity, valuation and fee transparency. The report therefore asks not simply whether private markets outperform, but how different private assets could affect the accumulation of retirement wealth when incorporated into a realistic long-term portfolio.
Five private asset classes, five different roles
To explore this question, the researchers model a stylised DC portfolio using a target-date fund (TDF) framework. They compare a baseline portfolio invested in public equities and bonds with portfolios that also allocate to five private-market asset classes: private equity, private debt, infrastructure, real estate and venture capital. The analysis incorporates regular monthly contributions and changes in asset allocation as retirement approaches. The results underline why private markets should not be treated as a single asset class.
In the study’s simulations, a 10% allocation to private equity produces the highest average end accumulation value and the highest average annual Sharpe ratio. Venture capital also increases average accumulated wealth and strengthens upside outcomes relative to the public-market baseline. Private debt, infrastructure and real estate play a different role. They generally produce lower average end accumulation values than the baseline portfolio, but also reduce the volatility of those outcomes, improving risk-adjusted performance. The distinction is important for portfolio construction. Private equity and venture capital behave primarily as growth-oriented assets in the model, while private debt, infrastructure and real estate can provide more defensive characteristics.
Combining them can further alter the balance. Pairing venture capital with defensive private assets, for example, can reduce volatility and improve the average annual Sharpe ratio compared with venture capital alone. For private equity, however, adding defensive private assets lowers volatility but also reduces the Sharpe ratio relative to an allocation solely to private equity. There is therefore no universally preferable private-market allocation. The appropriate mix depends on whether the objective is greater accumulated wealth, lower variability, stronger downside resilience or a different balance between risk and return.
The bigger lesson is about plan design
Perhaps the report’s most significant finding lies outside private markets themselves. Changing the accumulation period and the equity-to-bond glide path can affect retirement outcomes as much as or more than introducing private assets. And over the long term, the authors identify regular contributions and the period over which those contributions compound as the most important factors in securing adequate retirement income.
This changes the way the private-markets debate should be framed. Adding private equity or infrastructure to a pension portfolio is not an isolated asset-allocation decision. It needs to be evaluated within the complete retirement strategy: the participant’s investment horizon, contribution structure, changing risk profile and the way exposure to equities and bonds evolves as retirement approaches.
Private assets can complement those foundations. They cannot substitute for them.
Modelled returns meet real-world constraints
There is another important qualification. The study models potential outcomes; translating those results into an investable retirement product introduces practical constraints. Private assets are inherently less liquid than publicly traded securities, valuations are less frequent and more model-dependent, and fees can be considerably higher. The report also notes that historical private-market data and valuation smoothing can influence apparent volatility and performance.
These characteristics become particularly important in DC plans because individual participants may transfer assets, switch investment options or require liquidity at different times. Governance is therefore central to the investment case. Plan fiduciaries need to consider not only expected returns but also fees, valuation procedures, liquidity management, product structure, disclosure, conflicts of interest and operational capacity.
For policymakers, simply allowing private assets into retirement plans is not enough either. The report argues that regulatory safe harbours alone cannot guarantee satisfactory outcomes. Appropriate valuation standards, liquidity safeguards, disclosure requirements and fiduciary oversight remain essential, with gradual adoption through regulated structures and disciplined allocation limits presented as a more prudent route.
Private markets are not the retirement strategy
As access to private markets broadens, the debate can easily become centred on whether retirement savers should receive a share of returns previously available mainly to institutional investors. The CFA Institute research points towards a different question: what role is a private asset actually expected to perform within the retirement portfolio?
For some plans, private equity or venture capital could potentially enhance long-term growth. For others, private debt, infrastructure or real estate may be more relevant as tools for reducing variability. In every case, however, the allocation needs to be assessed within the wider architecture of the retirement plan.
That may be the report’s most useful message for investment professionals and policymakers alike. Private markets can expand the retirement investment toolkit, but access alone does not determine retirement outcomes. Contributions, compounding, asset allocation and sound plan design remain the foundations on which those outcomes are built.