Despite turmoil, private credit is still pushing into Americans' 401(k)s

• The private credit industry has been under fire for months, seeing record investor redemptions.
• At the same time, the push to offer private assets in retirement plans is moving ahead.
• We spoke to industry lawyers, researchers, and watchdogs to understand why it's continuing.

Earlier this month, a leader of the agency tasked with regulating markets and protecting investors laid out the agency's priorities, tying plans to open retirement funds to private-market investments and to boost crypto to America's 250-year history of enabling the "pursuit of happiness."

You wouldn't know from Securities and Exchange Commission Commissioner Mark Uyeda's March 19 speech that the biggest names in private credit are facing record investor redemptions amid criticism of their valuation policies and their exposure to troubled software companies. Private credit was only mentioned once.

Uyeda said that the government's role is not to protect Americans from potential investing mishaps, but to "build and maintain the infrastructure that makes free markets possible." To that end, he said that it is "not the government's role to impose its judgment as to what opportunities investors may pursue."

A few days later, as more funds reported outflows or credit downgrades, a key Department of Labor rule that could shield retirement plans that offer private equity and credit from retiree lawsuits completed White House review.

The rules are a result of President Donald Trump's executive order last August, which instructed the DOL to help open 401(k)s to private assets, with the SEC tasked as one agency that would consult with the DOL.

Soon, the rule's text will become public, commencing a 30-or 60-day comment period, followed by a final review by the Office of Information and Regulatory Affairs. As bad news continues to mount for private credit firms, the push for your 401(k) continues — raising the question: Is this the right moment to expand access?

According to Craig Copeland, the director of wealth benefits research at the Employee Benefit Research Institute, "discussions" about the impact of current market conditions are "beginning," but the "tremendous amount of momentum" and the money spent mean plans are continuing.

"I don't think it's going to immediately slow down unless something really bad happens," Copeland said.

Why are private markets going for 401(k)s?

The $12 trillion in defined-contribution cash represents a massive pool of money to help the private markets industry continue to grow, right as some institutional investors have decided to cut back on future private equity allocations. It's related to the industry push into the mass affluent, with funds offered to individual, wealthy investors through their financial advisors.

The private markets industry has been eyeing an entry into 401(k) plans since at least the first Trump administration, as the threat of lawsuits from retirees kept retirement providers from jumping into private assets. 'Litigation reform,' or protection from shareholder lawsuits, rose to the top of the wish list for the industry's biggest players since Trump's reelection.

Retirement funds are governed by the Employee Retirement Income Security Act of 1974, under which employers are fiduciaries, legally responsible for selecting investments in the interests of the plan participants. This standard has historically pushed toward low-cost, liquid structures like mutual funds.

A wave of participant lawsuits has already slashed fees in traditional 401(k)s, and those fees are substantially smaller than those charged by private credit and equity managers. Many in the industry believe these high fees are worthwhile and can lead to improved performance, though some are skeptical of the industry's returns. Uyeda called out this "disparity" between those who can invest in private assets and those who can't in his speech.

"The teacher or firefighter whose retirement is managed by a public pension fund has benefited from meaningful private market exposure for years, if not decades," he said. "The private sector worker saving through mutual funds in a 401(k) plan has not."

Now, the pending DOL rule could create the exact conditions for a boom in private assets in 401(k) plans.

"They need to prudently include private assets in defined contribution plans because access alone is not enough if plan sponsors are deterred by litigation that second-guesses good-faith decisions with the benefit of hindsight," Uyeda said.

What about the liquidity criticisms?

Concerns about the illiquidity of private assets are a "familiar" part of the argument against adding them to retirement plans, said Uyeda. The very nature of private assets means they don't trade on public exchanges, and therefore, can't be easily sold if a plan needs more cash.

Uyeda said that the "premium" for illiquidity can actually be "desirable" for future retirees, who are long-term investors that don't typically need to access their savings for years.

However, 401(k) plans still require liquidity for workers who change jobs and retirement plans, for workers who do retire, and for people who withdraw from their funds in an emergency, with tax consequences. In 2025, "hardship withdrawals" from Vanguard 401(k) plans hit a record, with 6% of participants pulling their money early.

The industry's solution has been to package private assets alongside traditional public, liquid assets in structures like target-date funds and to rely on repayments and continued worker contributions into their retirement plans to meet withdrawals. It has also highlighted private credit as a more liquid alternative to private equity, making it a mainstay of its retirement pitch.

That narrative is currently being tested, with investors looking to withdraw 11% or more of their funds from certain non-traded retail private credit vehicles.

"Within the last month and a half, we've seen exactly how liquid private credit is, right?" Jim Baker, executive director of nonprofit watchdog Private Equity Stakeholder Project, said, describing the market as "melting down" in recent weeks.

What does the turmoil mean for changes?

Record redemptions in private credit are matched by a challenging picture in private equity, with funds holding onto companies longer than typically, and payouts to investors are sluggish. Baker's organization sees the 401(k) push as a "bailout" for a struggling private capital industry, but unlike the 2008 and 2009 bailouts, it wouldn't be with government money.

"Now they're trying to bail out private equity and private credit with your and my retirement savings," Baker said. He said that one would have to be a "psychopath" to stop retirees from suing their plan administrators in this current market.

Others say the comparison to retail funds misses the mark. Kevin Walsh, fiduciary practice leader at Groom Law, who works on both retail-oriented funds and retirement fund structures, said that in retail funds, where there are no penalties for withdrawing money, redemption limits exist to protect investors.

"They have these gates in place so that the investors who want to be there for the long run can't be forced to allow investors who want to get out quickly to mess with long-term strategy," Walsh said.

"The semi-liquid evergreen market today, where we're seeing the gating, that's a retail channel," Walsh said. "The 401(k) space is an institutional channel."

Jonathan Epstein, the president and founder of the industry nonprofit Defined Contribution Alternatives Association, echoed that point, saying that no one is talking about adding the semi-liquid retail assets directly to a retirement plan lineup.

"Folks seem to be talking past each other," he wrote to Business Insider.

Even if protection against lawsuits is in place, that doesn't guarantee adoption.

"Plan sponsors are already dealing with complexities around other considerations like adding lifetime distribution options," Michelle Capezza, an employee benefits lawyer at law firm Mintz, told Business Insider about rules that allow annuities in retirement plans. "There are safe harbors for those options, yet they're still reluctant to do that type of diligence and add those types of features."

Private credit's ability to weather this storm, which combines its own sectoral issues with a softening economy in the face of the Iran War and a potential energy crisis, could actually end up being a selling point, said Copeland.

"It may be, in some perverse way, a good thing to have this happen if it doesn't crater, if they can weather it," said Copeland. "Then, they could say 'We can handle a liquidity crisis in the direct investment market, and if we do it with additional liquidity on top, we should be all right.'"

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