Private capital: Tailwinds for growth in US defined contribution plans

A policy catalyst that changes the feasible set

In March 2026, the DOL issued a proposed rule designed to facilitate the inclusion of alternative assets within US DC plans. The proposal introduces a process-based safe harbor that clarifies how US DC plan fiduciaries can evaluate investment options, including private capital, based on factors such as fees, performance, liquidity, valuation, and complexity. By reducing legal uncertainty and removing the heightened litigation concerns that had discouraged consideration of private capital, the proposal puts these assets on equal footing on a fiduciary basis, with other investment options in US DC plans.

Importantly, this analysis does not treat private market exposure as entirely separate from traditional defined contribution investment structures. While a meaningful portion is expected to be embedded within existing wrappers, a smaller share may be delivered through standalone or native private capital offerings. The projections, therefore, reflect a mix of embedded exposure and dedicated investment options.

Scenarios for the adoption of private capital in US DC plans

In our baseline scenario, adoption is driven by increasing comfort among plan fiduciaries and continued evolution in product design and governance frameworks. However, recent market dynamics have highlighted challenges in specific segments of private capital, particularly in areas such as direct lending within private credit. Other asset classes, including private equity and infrastructure, have continued to perform more resiliently. However, headlines around liquidity pressures, combined with varying levels of investor sophistication, are likely to influence the pace of adoption across US DC plans. Larger plans are likely to drive adoption, supported by adviser ecosystems and operational capabilities, with target-date funds (TDFs) emerging as the early delivery mechanism and collective investment trusts (CITs) (including target-date and other strategies) as fast followers.¹ In this environment, private capital exposure becomes embedded, primarily supported by custom implementations in larger plans and, to a lesser extent, complementary use of managed accounts, enabling allocations to scale gradually while remaining consistent with fiduciary standards.

Momentum is also building across the industry, with several large asset managers and target-date providers exploring partnerships, building internal capabilities, and signaling strategic intent to incorporate private capital exposure in US DC plans. These developments suggest the potential for broader movement if a small number of large plan providers move forward with allocation toward private capital assets.

In a more conservative scenario, adoption may remain constrained by litigation concerns, fee sensitivity, and the operational complexity of implementing private capital investments within US DC plans. In this case, plan sponsors may hesitate to include private capital exposure within TDFs, limiting access to participant-directed channels. Managed accounts may provide a limited pathway for adoption, enabling controlled allocation within a governed framework, but are unlikely to drive scale in the absence of default-based implementation. In this conservative scenario, without private capital embedded in TDFs, overall adoption will likely be more gradual and concentrated among higher-balance participants and larger plans. Smaller plans may face additional challenges developing the proper ecosystems for private capital adoption, including consultants, plan advisers, product developers, and recordkeeping platform providers.

Key success factors for achieving either scenario may include partnerships between investment managers, alignment between product design and recordkeeping technology, and coordination across the value chain to support participant education, governance, and control.

The forecast: Private capital could grow to approximately 6% of US DC assets by 2030

US DC plan assets have grown steadily over time, powered by persistent contributions and long investment horizons.² Looking ahead, mutual fund assets under management growth (excluding private capital) in US DC plans will likely stagnate. Growing share of new private capital inflows and reallocations will likely shift toward CITs and exchange-traded funds (ETFs), which are traditionally considered more cost-efficient and structurally flexible investment vehicles. With total US private employer-based retirement AUM reported at US$11.8 trillion as of December 2025, even modest menu evolution for US DC plans would likely be consequential.³ That structural persistence creates a runway for the gradual adoption of new asset types. It also raises the bar: Any innovation that increases complexity must be implemented with robust governance and operational readiness.

Assets in DC plans are concentrated in default-oriented structures such as TDFs and continue to grow through persistent contributions—incremental changes to portfolio construction, rather than wholesale menu redesign—can drive this outcome. In this context, the private capital projection above US$1 trillion by 2030 reflects the compounding effect of scale, gradual adoption, and embedded implementation within existing investment wrappers (mutual funds, CITs, and ETFs).

The projected 6% allocation to private capital reflects underlying exposure across defined contribution investment wrappers rather than a distinct product category and is the cumulative result of private capital investment within US DC plans (figure 3). In practice, this private capital exposure is expected to be delivered primarily through existing structures, such as TDFs in mutual funds and CITs, as well as bespoke CITs. As a result, private capital AUM will largely be embedded within these wrappers (TDFs and managed accounts) rather than sitting outside them.

We expect TDFs to play a major role

Private capital sleeves embedded within target-date funds

The Security and Exchange Commission’s public discussion about opening US DC plans broadly to private market exposure, including private capital, has reinforced why TDFs are a plausible starting point; long-dated TDF vintages may have holding-period characteristics that better align with limited-liquidity investments than daily-traded standalone options, provided liquidity and valuation governance are appropriately designed.⁴ TDFs represent the dominant allocation channel in US DC plans through default enrollment. Even modest private capital allocations within TDFs can drive significant AUM growth (figure 4).

Infrastructure and distribution: The real scaling constraints

Even with policy tailwinds and credible products, scaling private capital in US DC plans presents an end-to-end value chain problem. Outside of TDFs, introducing these private capital funds directly into US DC plans places greater responsibility on alternative investment managers and the broader ecosystem. The recordkeepers must be able to administer subscription and redemption mechanics, enforce allocation limits, and support look-through and exposure aggregation. Consultants and committees need reporting that makes private capital exposures legible; participants require candid communication about liquidity, valuation cadence, and fees. This reinforces why TDFs are likely to be the dominant channel for private capital adoption.

Regulatory commentary has historically highlighted litigation risk and the need for aligned guardrails as constraints on adoption. Recent DOL proposals introducing a process-based safe harbor are intended to reduce that heightened litigation concern and place private capital on a more comparable footing with other investment options within US DC plans.⁶ The focus shifts from overcoming a unique legal barrier to demonstrating robust governance, operational readiness, and protection for plan participants. In practice, that translates into a posture that demands proof of governance: documented processes for manager selection, fees, conflicts, valuation oversight, liquidity stress considerations, and participant communications. It also translates into operational expectations, technology upgrades (including artificial intelligence and digital transformation), data contracts, and monitoring routines that can separate early adopters from the rest of the market.

An outlook of gradual adoption with varied concentrations

Adoption will not be uniform due to the complexity of the product and platform changes. Private capital will likely concentrate on US DC plans that have the following attributes: larger plans with stronger governance infrastructure; affiliated investment managers that can deliver US DC-ready private capital sleeves; and platforms that can operationalize liquidity, valuation, and reporting guardrails at scale. Some organizations are already investing in operational readiness, positioning themselves for early mover advantages.

Strategic considerations for investment managers

1. Win the default channel first. Prioritize TDF integrations, particularly custom and packaged TDF structures, with clearly defined private capital sleeves, explicit allocation caps, and documented liquidity and valuation governance.⁷ Early implementations are already emerging, although they are not yet deployed in US DC plans. For example, State Street’s Target Retirement IndexPlus strategy plans to allocate 10% to private markets.⁸ Thrivent Aggressive Allocation TDF already incorporates private equity exposure at 2.7%, as of March 31, 2026.⁹
2. Innovate products. Drive product innovation within existing US DC offerings. Beyond TDF integration, private capital can be incorporated into new or enhanced product structures, such as multiasset, income-oriented, or capital preservation strategies, to introduce incremental yield or diversification while managing liquidity constraints. This approach allows providers to enhance existing solutions and create differentiated value propositions without requiring a fundamental redesign of plan menus.
3. Engineer for plan operations. Treat recordkeeper feasibility, data transparency, and risk aggregation, and evolving regulatory expectations as core product requirements, not afterthoughts. Operational fragility or compliance gaps can quickly translate into fiduciary risk.
4. Over-invest in disclosure and committee materials. Provide clear documentation that translates private capital mechanics into clear governance checkpoints, fees, liquidity limits, valuation cadence, and conflicts consistent with heightened disclosure expectations for semi-liquid and private-fund packaging.
5. Use US DC-compatible vehicles deliberately. Build a wrapper strategy that aligns with the underlying liquidity profile while enabling consistent oversight, daily valuation (where required), and clear communication with participants.
6. Build strategic partnerships to accelerate capabilities. Collaborate across private capital general partners, recordkeepers, and technology providers to access differentiated deal flow, enable operational scalability, and shorten time-to-market in an increasingly complex ecosystem.
7. Invest in technology and AI to enable scale and control. Leverage advanced analytics and AI to support liquidity modeling, valuation oversight, risk aggregation, and reporting, ensuring private asset integration remains operationally resilient and transparent at scale.

If executed effectively, the integration of private capital into US DC plans could mark a structural shift in retirement investment, expanding access to differentiated return streams and potentially improving participant outcomes over the long term. In this scenario, US DC plan participants stand to emerge as the ultimate beneficiaries, gaining exposure to asset classes historically reserved for institutional investors. However, investment firms that underestimate the operational, regulatory, and governance complexity risk reputational and fiduciary challenges that may limit adoption. Those that move early and build robust, scalable models may be able to position themselves as leaders in shaping the next generation of US DC investing.