Are private investments really a good idea?

Private equity used to be an esoteric investment that was off-limits to everyday people, but now, it’s coming straight for your retirement account. Empower, one of the largest retirement plan providers in the U.S., has been floating plans to offer private market exposure in defined contribution accounts since earlier this year — potentially reaching nearly 19 million Americans. It’s part of a broader trend that’s been puttering around headlines for months: Vanguard teaming up with Blackstone, Apollo launching a private credit ETF, Coatue building a public/private tech fund.

As firms position for the $84 trillion wealth transfer from Boomers to younger generations, alternative assets are being rebranded from niche to necessary. And there’s plenty of demand to go around — wealthy millennials are already leading the charge, with Bank of America recently reporting that 93% plan to increase their allocation to alternatives. Bain also estimates that retail investor assets in private markets will grow at a 9% to 10% CAGR through 2032, reaching roughly $60 to $65 trillion in AUM. All the while, some investors are losing faith in traditional portfolio strategies altogether: 72% say they no longer believe stocks and bonds alone can deliver the returns they want.

And in some ways, they’re right. With the average investor having unrealistic expectations like a 15%+ annual return, nascent markets can potentially deliver what they’re looking for. Private equity has historically outperformed the classic 60/40 portfolio from 1989 through the end of 2023 — and done so with less volatility. A 2024 KKR whitepaper also found that blending traditional drawdown funds with evergreen structures can improve long-term returns while smoothing out cash drag.

But just because you can access private markets doesn’t mean you should.

The biggest issue here is often liquidity. Unlike stocks or ETFs, many private market funds restrict when and how much you can withdraw — some only let you redeem 2–5% of your shares per quarter. That might sound manageable in theory, but if too many investors try to cash out at once, the fund can buckle under pressure, especially if it holds illiquid or distressed assets.

There’s also the illusion of stability. Because private funds aren’t marked to market daily, managers get to decide how much the assets are worth. That makes returns look smoother than they really are — a tactic some experts call “volatility laundering.” It might feel less risky, but in reality, you're just not seeing the full picture.

And if things go south, selling can be a nightmare. These funds might be required to honor redemptions at net asset value, but once liquidity dries up, that promise can fall apart fast — leaving investors stuck holding the bag.

Ultimately; private markets might be having a moment — and for some investors, they can add meaningful long-term value. But access shouldn’t be mistaken for simplicity. As private equity and credit creep into everyday portfolios, it’s more important than ever to understand what you’re signing up for. High potential doesn’t erase high risk.