Trump SEC follows DOL in private equity bailout push

Trump SEC follows DOL in seeking to bail out private equity, private credit with workers’ retirement savings

US Securities and Exchange Commission (SEC) seeks to expand fees that private equity managers can charge to everyday investors despite underperformance and illiquidity risk

WASHINGTON, DC — At a meeting this Wednesday, September 30, the US Securities and Exchange Commission (SEC) voted to expand private equity and private credit managers’ access to everyday investors’ retirement savings even as the industry has significantly underperformed stocks, charged very high fees, and repeatedly failed to return investors’ money. The SEC in August sent a proposed rule on “Enhancing Retail Exposure to Private Markets” (3235-AN59) to the White House, which concluded review of the rule last week.

Among other things, the proposed rule would “allow investment advisers to charge performance fees to an expanded set of clients.” The SEC has not yet released the proposed rule to the public. Currently, investment managers are only allowed to charge performance fees to wealthy “qualified clients.” The SEC’s proposed rules follow a 2025 Executive Order by President Trump and a March 2026 proposal by the US Department of Labor to give private equity access to ordinary retirement savers’ 401(k) plans. The SEC proposal could make it easier for private equity and private credit managers to charge higher fees to retirement savers.

“With the proposed rules, combined with the DOL’s 401(k) rule, the Trump SEC is seeking to bail out the struggling private equity and private credit industry with hardworking Americans’ retirement savings,” said Jim Baker, Executive Director of the nonprofit Private Equity Stakeholder Project. “Private equity funds have lagged public markets while charging much higher fees, and institutional investors are pulling back from the asset class. These rules risk shifting more financial risk onto workers who rely on their retirement savings for long-term security.”

An recent analysis by PESP raises serious questions about private equity access to retail investors. The research finds that private equity funds marketed to everyday investors have significantly underperformed public stock market indexes while charging far higher fees, undermining claims that these products offer superior returns.

Key findings include:

• In 2025, private equity evergreen funds delivered significantly lower returns than broad public stock market indexes.
• Over the past three years, these funds returned roughly half the gains of public equities, including the S&P 500.
• Some private equity funds charge annual fees approaching 4 to 5 percent, compared with about 0.03 percent for a basic S&P 500 index fund, even before accounting for sales charges.
• Public pension funds and other institutional investors are pulling back from private equity, citing weaker performance, liquidity risks, and high costs, with nearly one-third reducing allocations in the past year.
• Private equity and private credit investments are illiquid by design and can restrict withdrawals during periods of stress.

These proposed changes come as the private equity industry faces mounting pressure. According to industry data, firms hold approximately 32,000 unsold companies worth an estimated $3.8 trillion, while distributions to investors have remained below 15 percent of net asset value for four consecutive years. At the same time, average holding periods have increased, underscoring the challenges firms face in exiting investments.

“Private equity firms are already under pressure from a backlog of unsold assets and declining distributions to investors,” Baker added. “At the same time, policymakers are giving private equity access to retirement savers’ 401(k) plans, raising serious questions about whether these investment risks are being shifted onto everyday retirement savers.”

The SEC’s move to expand private equity and private credit manager’s access to ordinary investors comes as recent headlines about private equity and private credit managers restricting withdrawals from their funds have rattled Wall Street. Since the beginning of the year, several private equity and private credit managers including Blue Owl, BlackRock, Blackstone, Apollo, Ares, Cliffwater, Partners Group, and Morgan Stanley have moved to limit how quickly individual investors could get their money out after redemption requests surged, a reminder that even large private asset managers can halt redemptions when liquidity tightens. The recent restrictions have made these private market funds’ liquidity risk visible. Investors discovered that when redemption requests surged, they couldn’t simply get their money out. Rather than standing up for investors, the SEC’s proposed rule would let private funds defer investor repurchases for up to two years.

Warnings about private markets access to retail investors’ retirement savings are not coming only from critics. In a recent Reuters interview about private equity and credit access to retirement savers, Joshua Harris, a co-founder of private equity and credit giant Apollo Global Management, put it bluntly: “my own view is that it’s not going to end well.” Other private market executives also acknowledge the liquidity issue. Carlyle CEO Harvey Schwartz remarked that some private capital funds might more accurately be described as “sometimes not liquid at all.”

There is also a disconnect between how private equity and private credit funds are marketed and what individual retirement savers actually want. Last fall, surveys from AARP found that support for adding private market and cryptocurrency investments to retirement plans drops sharply once people learn about illiquidity, high fees, and limited transparency. Reporting by The Wall Street Journal found similar skepticism when workers understand what these investments really mean for their savings.

“Retirement accounts exist to provide security, not to bail out private market investments by shifting liquidity risk onto workers when markets turn,” Baker said. “At a minimum, the SEC should hold private equity to the same disclosure and transparency standards expected of publicly-traded stocks, mutual funds, and ETFs, including clear reporting on what funds are investing in, the fees and expenses retirement savers are paying, the amount of debt funds are using, and how these investments are actually performing compared with stocks.”

Read PESP’s analysis on private equity performance here: pestakeholder.org/reports/private-equity-underperforms