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Does Private Equity Enhance Retirement Investment Outcomes? Evidence from the Experience of Pension Plans

With fewer companies going public, the prospect of investing in private equities is becoming increasingly alluring. In the landscape of retirement account investments, private equity, or PE, has long been included in pension plans. However, academics and policy makers have frequently debated its usefulness in defined-contribution, or DC plans. While the existing academic literature on this topic makes compelling arguments for and against adding PE to DC plans, much of it relies on simulations with debatable assumptions. In this paper, Morningstar researchers examine the real, historical allocations to and performance of private equity in a selection of pension plans and how this data demonstrates the complexity of using PE in DC plans.

What’s inside:

  • What existing research says about private equity in retirement plans
  • What the existing use of PE in retirement plans says about trends in allocation and fund selection
  • What key factors are required to consider the use of PE in DC plans

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