When planning for retirement, traditional routes have often revolved around public markets like stocks, bonds, and mutual funds. However, private equity has begun to play a larger role in retirement portfolios. Alternative investments like venture capital, and private real estate are starting to be seen as an option in some retirement portfolios. In this blog, learn more about how private market investment can impact retirement portfolios, the role of private investments in retirement portfolios, and some key risks and considerations to think about when researching opportunities.

The Role of Private Investments in Retirement Portfolios

Recent Market Trends

According to BlackRock’s 2025 Private Markets Outlook, private markets are expected to grow from $13 trillion today to more than $20 trillion by 2030.[1] In a survey conducted by Empower, found that 72% of retirement plan participants believe that diversifying their retirement portfolio with some private market investment exposure could improve long-term retirement outcomes.[2]

Other findings from the Empower survey include:

73% of survey respondents say that having professionally managed private investments in retirement plans could help level the playing field for everyday investors
74% state that including private investments in 401(k)s/retirement plans can help people build wealth in ways that were previously limited to the ultra-wealthy
Nearly 31% of Americans say that they “would allocate” 10-15% of their retirement savings to private investments

Beyond this, the Office of the Investor Advocate at the SEC announced back in June 2025 that it would prioritize private market investments in retirement accounts as one of its objectives for 2026.[3] Including private investments in retirement portfolios has become more common as knowledge has expanded and more methods for the everyday investor to invest in startups have emerged.

Drivers of this Shift

So, what is causing this shift towards private investments becoming more commonplace in retirement portfolios? One of the primary reasons can be attributed to private markets outperforming public markets. According to Cambridge Associates, in 2024, the Global Private Equity Index has outperformed the MSCI World Index by more than 5% annualized on a net basis over the past 25 years.[4] Please be aware past performance is not indicative of future results and cannot be guaranteed. With rising interest rates, inflation, and geopolitical uncertainties, publicly traded equities have experienced heightened volatility. In contrast, some private investments may be able to help provide diversification.

Venture Capital in Retirement Portfolios

Venture capital typically focuses on early-stage and high-growth startups, which can offer investors exposure to disruptive technologies and emerging industry. While typically it is inherently risky, it could provide potential opportunities to investors adding venture capital to their retirement portfolios.

For retirement investments, venture capital may be able to serve as a high-growth allocation within a broader portfolio. While 9 out of 10 startups fail, one successful investment may be able to help mitigate other losses, making venture capital an option for those with a high risk tolerance. Additionally, venture capital can provide exposure to sectors like artificial intelligence, biotech, and clean energy – areas that are poised to shape the future.

However, venture capital also requires patience and a long-time horizon. Most startups take years to mature, and exits, whether through initial public offerings (IPOs) or acquisitions are unpredictable.

Private Real Estate in Retirement Portfolios

While real estate has held a long standing role in retirement investing, they typically come in the form of public Real Estate Investment Trusts (REITs). While public REITS can provide liquidity, private real estate investments, like direct property ownership, private funds, or syndicates, may be able to offer potential opportunities.

Some of the benefits of private real estate include consistent cash flow, mitigation against inflation, and tax benefits. If an investor also serves as a landlord, rental income from commercial or residential properties can provide retirees with steady passive income. Additionally, rent has generally kept pace with inflation as measured by Consumer Price Index (CPI) while some home prices have risen faster than inflation.[5] This correlation may be able to help preserve purchasing power. Finally, depreciation deductions and 1031 rental home exchanges can potentially reduce an investor’s taxable income. Not everyone has the same tax situation and you should consult a qualified tax professional to see if these tools could be an option for your portfolio.

Risks and Key Considerations

While private market involvement in retirement portfolios could offer diversification, they also hold a high degree of risk investors should consider. For example, unlike stocks, private investments are inherently illiquid and cannot be sold easy, making them challenging for investors with short-term needs. Additionally, private equity and VC funds often charge management and performance fees, which may eat into any potential returns. If you plan on using a retirement account, depending on the type of the account, you may not be able to purchase or hold private securities in the account, so it is important to understand the limitations and restrictions. Finally, assessing private investments requires a high level of financial knowledge and expertise. To help mitigate these risks, investors should consider consulting with experienced financial advisors, use diversification principles, and ensure that their retirement allocations align with their overall retirement timelines and goals.

Final Thoughts

Private markets are playing a larger role in retirement portfolios as knowledge and access have expanded. As investors look to include private investments in their retirement portfolios, it is important to understand the different types, benefits, and risks. Private equity, venture capital, and private real estate can each provide unique opportunities but are also held in liquidity constraints, require a high level of knowledge to fully understand, and require a high tolerance for risk. While not suitable for everyone, private investments may be able to play a role in an investors’ retirement portfolio.

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[1] https://www.blackrock.com/ca/institutional/en/insights/private-markets-outlook

[2] https://www.asppa-net.org/news/2025/7/private-market-investments-in-retirement-plans-on-the-wish-list/

[3] https://www.napa-net.org/news/2025/6/sec-to-examine-private-securities-in-retirement-accounts/ad

[4] https://www.kkr.com/insights/private-equity-vs-public-market-returns

[5] https://www.investopedia.com/ask/answers/correlation-inflation-houses.asp

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.

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