• Private markets strategies will be in 401(k) plans ‘sooner than we think’
• Managers are building infrastructure to support regulatory compliance
• Infrastructure seen as a good fit for private wealth segment

Steve Brennan is a managing Director and co-head of evergreen portfolio management at Hamilton Lane, overseeing the firm’s private wealth solutions business. As of 20 February 2025, Hamilton Lane’s evergreen platform stands at more than USD 10bn in assets under management. The firm is currently working to include Hamilton Lane products in private market models – for example, a model portfolio through iCapital.

Q: How are private markets managers trying to penetrate defined contribution (DC) pension plans?

A: It’s really about trying to make private markets available to individual investors that save for retirement through DC plans in a way that investors in defined benefit (DB) plans have had access to for decades. Private markets managers are so focused on DC plans today as it’s a massive market worth USD 12.5tn that remains largely untapped. Firms have been conducting extensive research on what’s required to enter this space and hiring experts in structuring and distribution. Most importantly, we’re starting to see the formation of partnerships between public and private market managers, for example Apollo and State Street, KKR and Capital Group, and, most recently, Blackstone with Vanguard and Wellington. These partnerships create a path to DC plans.

Q: The opportunity is clear, but what implementation challenges do you see?

A: Some of the challenges are regulatory. Any 401(k) plan investment option must be available to all plan participants. A private markets fund that has particular qualification standards or suitability standards and is only available to accredited investors or qualified clients may not be suitable. Additionally, there are structural and operational barriers. For instance, you may need to have an investment offering that is valued on a daily basis or provides liquidity more frequently than monthly or quarterly. Private market managers are starting to build infrastructure to support things like valuing funds daily and providing monthly liquidity. Such changes are necessary to align with 401(k) plan requirements.

Q: How long before we actually see private markets exposure in 401(k) plans?

A: It’s hard to say with certainty – the best way to put it is that it’s probably sooner than we think. We may first see private markets included in target date funds in structures such as collective trusts, representing a small percentage of a larger pool of capital being managed through those public-private partnerships. The market will evolve from there.

Q: What are the key issues on the regulatory side?

A: The focus is on starting small. For instance, a target date fund might allocate, say, 10%-15% to private markets, with the remainder in public markets. Then there will be a focus on demonstrating to regulators the success and acceptance of this strategy, which could see a push to deregulate and allow larger private market allocations. The ultimate goal is to allow participants in 401(k) plans to allocate directly to a private market fund by choosing from a menu of offerings vetted by plan administrators or sponsors.

Q: Which products and innovations are you most excited about?

A: One innovation we’re excited about is our recently launched semi-liquid [evergreen] fund in the infrastructure space. Infrastructure offers downside protection and diversification benefits. Private infrastructure is also an asset class that will be easy for financial advisors and their clients to understand – airports, roads, and bridges are tangible examples. Moreover, trends like the rise of AI [artificial intelligence], energy generation demands, and supply chain transformation are all rooted in infrastructure. The tailwinds are strong.

Q: What is your view on model portfolios?

A: They are increasingly relevant in today’s market. This is a natural evolution of the private markets movement into the wealth space. Essentially, it’s about packaging private markets in a way that financial advisors understand and is consistent with how they manage their client capital, which in many cases is based on models based on individual risk-return profiles.

We’re seeing private markets integrated into models in two ways. Firstly, there are model portfolios exclusively made up of private market investment options – such as private equity, private credit, private real estate, or a blend of private market strategies. These offer diversified exposure.

The second, which I think will develop a little more slowly, is adding private markets into the existing models that financial advisors are using to manage their portfolio, like the traditional 60/40 portfolio [60% equity, 40% fixed income]. Over time, you might see models evolving to something like 50% equity, 20% fixed income, and 30% private markets.