Meanwhile, BlackRock CEO Larry Fink has been making the case for including private assets in retirement plans. With good reasons, he thinks the combination of public and private markets has proven to be a “fabulous investment” for most institutions. At the same time, major asset managers and plan providers are advocating to maximize the portion of private assets. Their eventual vision aims to chip away at the $12.5 trillion workplace retirement plan market. Today, private assets account for under 1% of assets in 401(k)s and other defined contribution plans.
Fink’s advocacy comes at a moment when the fundamental mosaic of American companies is changing. According to the Partners Group, a Swiss-based global private equity firm, approximately 87% of companies in the U.S. with annual revenues exceeding $100 million are now private. BlackRock manages upward of $11.6 trillion in assets, over half of which are in retirement products. Most recently, they purchased Preqin, a leading provider of private market data, signaling their continued focus on this space.
"A blend" of public and private markets has been a “great investment” for many institutions. - Larry Fink, chairman and CEO of BlackRock
Speaking at a retirement summit sponsored by BlackRock last week, Fink emphasized the need for greater transparency and analytics to facilitate the integration of private assets into retirement products.
"Our job is to be providing a much better transparency and analytics to get that done." - Larry Fink, chairman and CEO of BlackRock
Ed Murphy, CEO of Empower, the second-largest U.S. retirement services company, echoed this sentiment, noting the ongoing efforts within the industry to make private assets a sensible option for employers and their retirement plans.
Even the idea of bringing private equity into retirement plans has its doubters. Olivia Mitchell, a professor of business economics and public policy at the University of Pennsylvania and executive director of the Pension Research Council, acknowledges the potential for higher returns but cautions against the increased risk and volatility associated with private equity, particularly for those nearing retirement.
"Private equity can pay higher returns than traditional public market investments, of course, with greater risk for retirement savers. This could offer an opportunity for higher growth for their assets, but it would mean more exposure to volatility, which is probably not ideal for people nearing retirement." - Olivia Mitchell, a professor of business economics and public policy at the University of Pennsylvania and executive director of the Pension Research Council
Robert Burnette, a financial advisor and CEO of Outlook Financial Center in Troy, Ohio, stresses the importance of investor comprehension.
"If they don't understand what they're buying, they shouldn't be in it." - Robert Burnette, a financial advisor and CEO of Outlook Financial Center in Troy, Ohio
Fink says he hopes to work with regulators such as the Department of Labor and the Securities and Exchange Commission. He doesn’t just want to demonstrate that private market instruments can be a fit for retirement products.
"If we could do that, we could then go to our regulators, whether it's the [Department of Labor] or the [Securities and Exchange Commission], depending on where we are trying to expand the investment opportunities and prove to them, show to them that these can be sensible instruments for a retirement product." - Larry Fink, chairman and CEO of BlackRock
