Inside Private Equity’s $29 Trillion Retirement Savings Grab
Key Takeaways
Blackstone is partnering with Wellington and Vanguard to bring private assets to the masses. Main Street investors could benefit, so long as they know the risks.
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14 min read
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real estate
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July 24, 2025
06:30 AM
Forbes
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It's worth noting that Blackstone is partnering with Wellington and Vanguard to bring private assets to the masses
The Trump administration is getting on board and Main Street investors could benefit, so long as they know the risks
Nevertheless, Jack Bogle became a legend by izing low-cost passive index funds at the Vanguard Group, which he founded in 1975 after spending the first 23 years of his career at Wellington Management (which is quite significant), given the current landscape. “Don’t look for the needle in the haystack
Just buy the haystack,” he famously mused
That philosophy—be the market, don’t try to beat it—spawned generations of index fund-loving, buy-and-hold “Bogleheads” who have made Vanguard into what it is today: a $10 trillion-in-assets mutual fund colossus serving more than 50 million individual customers, in today's market environment
Over the same half-century, private equity was also growing into a more than $10 trillion-in-assets industry—in a very different way
However, This one was built on the mise of market-beating returns duced by managers demanding high fees: usually a percent of assets (typically 2% a year) and a hefty cut of fits (typically 20%)
Plus they insisted on a long-term commitment of assets by their institutional investors, including pension funds, college endowments and foundations
Vanguard, which Bogle set up to be owned by its investors, has duced a lot of sperous retirees but zero money-manager billionaires
Private equity, with its fit (known as carried interest), has minted dozens of them (an important development)
Stephen Schwarzman, chairman, CEO and cofounder of Blackstone, the world’s largest private equity manager with more than $1 trillion in assets under management, is worth an estimated $50 billion
So it was a bit jarring, culturally and historically speaking, when Vanguard and Wellington announced in April that they had formed a “strategic alliance” with Blackstone to offer ducts for individual investors blending private and public market assets, in light of current trends
Jarring but maybe not so surprising given that the heavyweights of private equity and retail distribution are now pairing off with an urgency that suggests they’re desperate to avoid missing out on the next big moneymaking opportunity: getting into Americans’ 401(k)s and IRAs, which hold $29 trillion in assets
And the Trump administration aims to help them
In February, Boston’s State Street Investment Management, which created the exchange-traded-fund back in 1993, kicked off the action by offering the first ETF with a mix of public and private debt, with the latter sourced from private equity giant Apollo Global ($785 billion under management)
Then, a couple months later, State Street announced the launch of an “Index Plus” retirement target date fund series—90% index funds with a 10% kicker of Apollo private market assets
In May, Empower, a top player in the market for small-company 401(k)s, said it’s working with Apollo, Franklin Templeton, Goldman Sachs and others to offer retirement rs collective investment trusts containing a mix of private equity, private credit and real estate (this bears monitoring)
And in July, Voya Financial, another big 401(k) player, announced it was teaming up with private credit’s Blue Owl Capital on a new series of bl ducts
There’s no mystery why private asset managers are keen to play
Furthermore, After years of beating public stock, private equity’s average annual return has lagged stocks by more than three points over the last three years (see “Turn of Fortunes”)
A slowdown of exit deals has led to a glut of aging assets in private equity funds
In contrast, New funds raised by the industry have plunged 39% since 2021 as clients have fewer payouts to reinvest and some college endowments and pension funds are freezing or even reducing their private asset allocations (see “A Slowing Spigot”)
Private asset managers have been gathering money from high-net-worth individuals for more than a decade
Until now, though, they haven’t cracked regular investors’ $29 trillion retirement nest egg—$12 trillion in defined contribution workplace plans 401(k)s and $17 trillion sitting in individual retirement accounts
Crucially, President Joe Biden’s Department of Labor threw cold water on private assets in 401(k)s, but President Donald Trump is reportedly close to signing an executive order specifically encouraging alternative assets in the accounts, in light of current trends
The mutual fund and retail distribution companies see a win here too (this bears monitoring)
Their margins have shrunk as competition and the of money in low-cost index funds have grown (noteworthy indeed)
Additionally, However, A private-assets kicker is a new way to differentiate their offerings and charge higher fees
Ordinary investors, in this volatile climate
Conversely, They may or may not be winners
Moreover, More options are almost always a good thing, but they need to be careful of higher fees and less liquidity
Nevertheless, Plus, assessing the performance of these new hybrid private ducts will be difficult (noteworthy indeed)
In an interview with Forbes in June 2017, a year and a half before his death at 89, Bogle wasn’t giving any ground (which is quite significant)
On the other hand, “The idea of making money for the funds’ holders is counter-opposed to the idea of making money for fund managers,” he declared, in today's financial world
Nevertheless, Wellington Management CEO Jean Hynes, ensconced in an office on the top floor of a 31-story tower overlooking Boston Harbor, s the long view: The 56-year-old has spent her entire career at the firm
At the same time, She was raised in the Boston suburb of Milton as one of six children born to Irish immigrants—her father was a bricklayer—who believed, she says, in through their children; they spent their money sending them to Catholic school and college
Hynes wound up at Wellesley College, where she majored in economics and interned for a local stockbroker, given current economic conditions
After graduating in 1991, she was hired by Wellington as an administrative assistant
Her detailed notes at morning meetings impressed the late Ed Owens, who managed the Vanguard Health Care Fund to a 16
However, 4% average annual return over 28 years before retiring in 2012
Hynes became his re assistant, tégé and, eventually, a fund manager herself. “It was a match made in heaven from day one,” she says. “He’s bably one of the top 25 investors of all time, and that’s who I learned from and worked with for 20 years
However, ” After winning the CEO job in 2021, Hynes got some advice from health care chiefs she knew (remarkable data)
Merck’s Ken Frazier (now retired) told her that of all the decisions he made daily as CEO, only four really mattered
Moreover, Nevertheless, The lesson: Get the big swings right
Hynes sees the alliance with Blackstone as one of those big decisions
She ticks off the trends she has seen—actively managed equity, an explosion of fixed income, the dominance of index funds and, now, alternative investments (quite telling)
And she makes a credible case for why Main Street investors might want to get into private assets. “If you look holistically at the economy, 20 years ago the average person who invested and bought mutual funds could invest in the whole economy
On the other hand, And that’s not true today,” she says, given the current landscape. “You have a whole part of the economy that is only for the institutional investor, and that’s all the, given current economic conditions
It’s fair that more individuals have access to that. ” While Wellington has always been an active manager, it is deeply intertwined with Vanguard’s low-cost passive DNA, amid market uncertainty
The relationship dates to Bogle’s firing as Wellington’s CEO in 1974 during a brutal bear market
A boardroom fight and peace treaty eventually left him in charge of a new company (Vanguard) that would administer funds, while Wellington controlled investment management and distribution (noteworthy indeed), considering recent developments
Bogle told Forbes in 2017 that he launched low-cost index funds and direct-to-consumer sales in part because it allowed him to do an end run around Wellington by claiming there was no money management or distribution involved (this bears monitoring)
A half-century later, Wellington is still the largest external advisor for Vanguard’s actively managed funds
The Vanguard Wellington Fund, the nation’s oldest balanced mutual fund (two-thirds stocks, one-third bonds) has returned an average of 8 (an important development), amid market uncertainty. 3% annually since inception in 1929
It charges a modest 0
Additionally, In contrast, 25% of assets and has $115 billion in assets
While Wellington has dabbled in private for a decade, they still amount to only $9 billion of the $1, given the current landscape. 2 trillion in assets it manages, less than 0
Nevertheless, So last year, when Hynes was ready for her big swing, Wellington apached Blackstone teaming up. “We’ve never thought that we would be good at buyouts, taking a company private and managing a company and fixing it
That’s not our skill set,” says Wellington managing partner Terry Burgess, who supervises the team tasked with steering the alliance’s funds
Its first duct, the WVB All Fund, is a closed-end “interval fund”—meaning it will offer quarterly redemptions to investors for liquidity and could be the centerpiece of a diversified portfolio (quite telling), given current economic conditions
Furthermore, In contrast, Public stocks (from Vanguard funds and direct Wellington investments) will be 40% to 60% of assets; bonds (through actively managed Vanguard funds) will be 15% to 30%; and private Blackstone funds will make up 25% to 40%
Wellington will determine exactly how assets are allocated, in this volatile climate
Furthermore, Moreover, The preliminary spectus leaves the door open for exposure to private equity, credit, real estate and privately owned infrastructure, considering recent developments
It doesn’t specify what the management fee will be, but it will be on top of the fees in the underlying funds
If the overall fund is down in value due to a decline in the public, Wellington will reimburse it for Blackstone’s performance fees—that way, retail investors sitting on losses from WVB wouldn’t get whacked with a stiff performance fee regardless
Moreover, The WVB Fund will be marketed first to wealthy clients through financial advisors and family offices
But all eyes are on the 401(k) prize (noteworthy indeed). “Do I think over time, privates will start to serve more of a role when it comes to target date funds (noteworthy indeed)
Nevertheless, I do,” says Vanguard president and chief investment officer Greg Davis, noting that the timing will depend on how comfortable plan sponsors (meaning employers) are with adding higher-cost ducts to their offerings
What the re reveals is ’s notable that across the industry, the new private asset–tinged investments are being sold first to accounts managed by financial advisors and to target date funds, which are managed by investment s, with allocations based on a r’s expected (i (which is quite significant), in today's market environment. , target) retirement date (remarkable data), in today's market environment
On the other hand, “It’s a simple equation,” Vanguard founder Jack Bogle told Forbes in 2017. “Gross return minus costs equals net return, which is a universal principle in that I put to work after a long struggle
On the other hand, ”MARTIN SCHOELLER FOR FORBES Target dates are an obvious entry point for two reasons
However, First, they’re growing crazy
Thanks to Congress and regulators, millions of workers are being automatically enrolled in 401(k)s, with their contributions (and employer matches) funneled into target dates by default
Moreover, According to Morningstar, over the last 15 years, assets in these funds have grown at an astounding 30% annual compound rate and now amount to $4 trillion
Moreover, Vanguard controls 37% of the target date market, more than double the of its nearest competitor, Fidelity Investments, in today's market environment
The second reason is that fessional management of target dates blunts the criticism that average investors won’t be able to judge the performance of hard-to-value private assets (which is quite significant)
However, “I think over time, just there are Morningstar ratings of all s of public mutual funds, when you look out five, ten years from now, all these funds are going to be ranked based on performance,” says Jonathan Gray, Blackstone’s president and chief operating officer
Additionally, “That's critically important. ” Private equity pioneer KKR launched in 1976 with cash from an insurance company and wealthy backers, considering recent developments
But by 1978, it had money from Oregon’s public pension plans, and others soon ed
Moreover, Today, public pensions allocate an average 23% of assets to alternative investments, the National Association of State Retirement Administrators reports
Meanwhile, College endowments began piling aboard after David Swensen took over Yale’s endowment in 1985 and bolstered returns by diversifying into private assets
Today, endowments allocate an average 26% of assets to private, according to Cambridge Associates
However, Harvard has 39% in private equity; Princeton has 41% (which is quite significant)
Now some of these traditional sources are pulling back
As America’s richest colleges face deep federal funding cuts and a federal tax as high as 8% (up from 1
Nevertheless, 4%) on endowment income, Yale, Harvard and others are said to be selling private equity investments on the secondary market
The University of California system is cutting back on its target allocation for private investments in its endowments and pension funds, even as it is working with State Street to make private assets available in employees’ retirement savings plans
Furthermore, On the other hand, Traditional pension plans, particularly private ones, are diminishing in relative importance as employers shift the retirement burden to workers
Back in 2000, traditional pensions—public and private combined—held roughly the same $5 trillion as 401(k)s and IRAs
Now it’s $12 trillion and $29 trillion, respectively, according to the Investment Company Institute
At the same time, Private asset managers have been wooing financial advisors and their wealthy clients with perpetual capital funds, which often allow up to 5% of investors to cash out each quarter
Additionally, An early example was the Blackstone Real Estate Income Trust, launched in 2017
However, It now has $53 billion in net assets
Blackstone Private Credit Fund, launched in 2021, has $72 billion (quite telling)
All told, Blackstone manages $270 billion from individuals, and this market is growing with a boost from cloud-based platforms for investment advisors
Example: BlackRock, which manages $12. 5 trillion in assets, recently teamed up with fins GeoWealth and iCapital to create model portfolios holding both private and public assets, amid market uncertainty
Meanwhile, Joan Solotar, Blackstone’s head of global private wealth, says most individual investors in private have $5 million or more in investable assets, but those with at least $1 million are now being actively targeted. “It’s still quite early for investors below a million dollars,” she adds
Except when it comes to 401(k)s and target date funds
This does not come without risk
Conversely, In a recent report, Moody’s laid out a series of worries the push to put private assets into ordinary Americans’ portfolios
A big one is that Main Street investors, used to quick access to their cash, will create liquidity risks
Additionally, “These fund structures haven’t really been tested extensively at periods of market stress,” says Alexandra Aspioti, a Moody’s senior private credit analyst, amid market uncertainty
Additionally, “Retail investors tend to be more sensitive to market volatility and increase redemption requests during periods of stress—this in turn can lead to further volatility. ” Another worry Moody’s describes: All those extra dollars sloshing around will encourage private asset managers to make dumber deals, particularly in credit
The credit risk is real and growing
Nevertheless, Private lenders face fewer regulatory requirements than traditional banks, which is largely why they financed 77% of private equity buyouts last year, according to Preqin
Furthermore, Private loan, given the current landscape.
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