Empower, one of the nation's leading retirement services providers managing over $1.8 trillion in assets for approximately 19 million individuals, has announced a significant shift in its 401(k) offerings. Starting later in 2025, the company will allow certain retirement plan participants to invest in private market assets, including private equity, private credit, and real estate. This initiative is in collaboration with major asset management firms such as Apollo Global Management, Franklin Templeton, Goldman Sachs, and Partners Group.
Traditionally, private market investments have been accessible primarily to institutional investors and high-net-worth individuals due to their complexity, higher fees, and liquidity constraints. Empower aims to democratize access to these assets by incorporating them into collective investment trusts (CITs), which are commonly used in retirement plans for their liquidity and cost-effectiveness.
To ensure suitability and manage risk, these private investments will be available only through managed account platforms. Employers must collaborate with financial advisors to align these investment options with employees' risk profiles and long-term financial goals. Empower's CEO, Edmund F. Murphy III, emphasized the importance of advisory support, stating, "These new opportunities offered under an advice model deliver the guardrails necessary to help an entirely new investor class access private investing."
While the inclusion of private assets offers potential benefits such as portfolio diversification and inflation protection, it's important to note the associated challenges. These investments are less liquid and harder to value, and they typically come with higher fees—ranging from 1% to 1.6% annually—compared to the average 0.28% for standard target-date funds.
As of now, five unnamed employers have agreed to offer these private investment options when they become available in the third quarter of 2025. The move reflects a growing interest in expanding retirement investment horizons, providing employees with access to a broader range of asset classes within their 401(k) plans.WSJ
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