Key takeaways
- Executive Order 14330 and the Department of Labor’s March 2026 proposed rule are opening defined contribution (DC) plans, which hold greater than $15 trillion, to private markets. The question now is how to bring private markets in responsibly.
- Illiquidity capacity drives sizing. Younger and mid-career savers in target date funds (TDFs) can support roughly 20–40% in private markets, tapering to 10–15% near retirement. The range holds up across 2,000 simulations and a severe stress test.
- The private markets mix should change with the saver’s objective. Growth portfolios lean on private equity (40–60%), while income portfolios near retirement shift toward private debt (30–40%) and real assets (40–50%) for cash flow and resilience.
- Implementation matters as much as allocation. Evergreen structures can reach target exposure immediately, compared with a ramp of five to 10 years for traditional closed-ended funds, and they simplify cash flows and valuation for TDFs.
- A disciplined, documented fiduciary process should anchor any program. It rests on the six factors in the Department of Labor’s proposed rule (performance, fees, liquidity, valuation, benchmarking, and complexity) and on ongoing oversight that tests cost against value.
Executive summary
For a quarter century, the largest and most sophisticated pools of capital, from pension funds and endowments to sovereign wealth funds and defined contribution (DC) plans around the world, have relied on private markets to drive returns and manage risk. The average American saving through a DC plan has not.
That divide is now closing. In August 2025, Executive Order 14330 established a federal policy of opening DC plans to alternative assets, and in March 2026 the Department of Labor proposed a rule giving fiduciaries a defensible path to offer them.1 With more than $15 trillion in DC plans, the focus is shifting from whether private markets will reach retirement savers to how to bring them in responsibly (Figure 1).
FIGURE 1: TOTAL US MARKET SIZE (US$ TRILLIONS)
Source: Investment Company Institute (ICI), The U.S. Retirement Market, Second Quarter 2026, data as of June 30, 2026.
For years, regulatory uncertainty, litigation risk, and concerns around liquidity, fees, valuation, and transparency kept most plan sponsors on the sidelines. These concerns are real: private assets introduce challenges that public market menus largely do not. They are often framed as arguments against private markets. We see them differently: they are design constraints. With the right portfolio construction, investment structure, manager and advisor selection, data, and technology capabilities, each can be managed effectively. The asset class itself has also matured. Over the last four decades, private markets have developed more transparent reporting and fund structures better equipped to manage liquidity.
Private markets in DC plans are not a new concept in other geographies. Australia has been doing this at scale for decades. AustralianSuper, the largest fund in its DC system, has invested in private assets for more than 25 years, and today over 25% of the portfolio used by most of its members is invested in private equity, infrastructure, real estate, and private debt. During the March 2026 selloff, AustralianSuper said those assets “acted as a ballast” as listed markets declined.2 Mexico already invests retirement savings, held in analogs to US target date funds, through dedicated private market structures, while major UK DC plan providers are increasing private market allocations. Other retirement systems have already crossed this bridge.
This paper focuses on what comes next: how much to allocate and what to allocate to. Drawing on StepStone’s proprietary data and technology capabilities, we approach both questions without a predetermined answer, using quantitative analysis to assess the tradeoffs. The result is a foundation, not a prescription. Plan sponsors may reasonably reach different solutions based on their participants’ needs, fee tolerance, scale, access, and implementation realities.
The goal is not access for its own sake. It is a program built to improve outcomes for the people it is meant to serve.
