Only 10% of retail investors say they want expanded access to private markets. So why is the entire industry pushing for it?
On the latest episode of Impact(ed), we sat down with Ian Fuller (Westfuller Advisors) and Ben Schiffrin (Better Markets) to unpack what’s actually happening as firms like Blackstone, Apollo, and KKR make their push into 401(k) accounts.
We talked about:
- The new Department of Labor guidance creating a ‘safe harbor’ for private market investing in retirement plans—and why removing fiduciary liability changes everything
- Why the democratization framing deserves real scrutiny—and who’s doing the framing
- What the fee math actually looks like when you put 2-and-20 next to a Vanguard index fund
- The liquidity trap: what happens when everyday investors can’t get their money out
GLOSSARY
Accredited Investor
Technical: A person or entity that meets the SEC’s wealth or income thresholds—currently $1M net worth (excluding your home) or $200K annual income ($300K for couples).
In practice: The legal standard used to determine who can access private market investments. The idea is that accredited investors are sophisticated enough to fend for themselves without the protections that apply to public offerings. The thresholds haven’t kept pace with wealth concentration, which means a lot more people technically qualify now than the rule originally imagined.
2-and-20
Technical: The standard fee structure for private market funds: a 2% annual management fee on assets under management, plus 20% of profits (called ‘carry’ or ‘carried interest’).
In practice: Compare that to a Vanguard S&P 500 index fund, which charges roughly 0.03%. For every $100,000 invested, you’re paying $2,000/year in management fees before the fund has done anything—plus a fifth of any gains. Ian was direct: funds with this fee structure don't consistently produce better outcomes than passive investing.
Liquidity / Illiquid
Technical: Liquidity refers to how quickly and easily you can convert an investment into cash. Illiquid investments can’t be sold quickly—you may need to wait months, years, or until a specific exit event.
In practice: Index funds and ETFs in your 401(k) are highly liquid—you can sell them and get your money in days. Most private market funds are illiquid. Some ‘semi-liquid’ private credit funds cap redemptions at 5% per quarter, meaning if you need your money and others do too, you may simply be told to wait. Ben noted that redemption requests at some private credit funds are currently exceeding that 5% limit.
Why it matters: Retirement accounts aren’t always held until retirement. People dip in for emergencies. Illiquid assets in a retirement account mean you may not be able to get your money when you need it.
Safe Harbor
Technical: A legal provision that protects a party from liability if they’ve followed a specific set of rules or procedures, even if the outcome is bad.
In practice: The Department of Labor’s proposed rule would create a safe harbor for 401(k) plan managers who follow certain steps before investing in private markets. If they follow the process, they’re shielded from lawsuits—even if the investment performs poorly. Ben’s concern: the guardrails in the safe harbor may not be sufficient to actually protect retail investors, especially those who don’t have access to a sophisticated advisor to ask the right questions on their behalf.
Why it matters: Safe harbors can be appropriate policy tools. But they can also shift the risk from institutions (who can absorb it) to individuals (who often can’t). That’s the core tension this episode kept returning to.
