Research says trimming a decade off the savings horizon wiped about 65% from end value
A 10 percent allocation to any one of five private market asset classes lifted the mean annual Sharpe ratio of a modelled target-date fund above an equities-and-bonds baseline over a 40-year accumulation period.
Private markets in retirement plans: Returns, risks, and the importance of plan design, published in September by the CFA Institute Research and Policy Center, ran 10,000 Monte Carlo accumulation pathways for a stylised defined contribution plan using US-dollar return data from 1 January 2010 to 31 December 2024.
Raymond Ka-Kay Pang, PhD, senior researcher at CFA Institute, and Fan Yang, affiliate researcher at CFA Institute, tested private equity, private debt, infrastructure, real estate, and venture capital against a baseline fund holding only public equities and government bonds.
The baseline glide path held equities alone for the first 30 years before a linear shift to 30 percent equities and 70 percent bonds by year 40.
Funds carrying private assets held that allocation fixed at 10 percent throughout, ending at 27 percent equities, 63 percent bonds, and 10 percent private markets.
Private equity produced the highest average end accumulation value at US$1.489m, 13 percent above the baseline figure of US$1.316m and a difference of US$173,000 in nominal wealth.
Its mean annual Sharpe ratio reached 0.531 against 0.462 for the baseline, alongside the broadest range of end accumulation values.
Venture capital averaged US$1.35m and a Sharpe ratio of 0.493.
Private debt, infrastructure, and real estate each finished below the baseline on average end value, at US$1.297m, US$1.293m, and US$1.301m.
Each also cut the volatility of end accumulation values, to US$0.824m, US$0.812m, and US$0.823m against US$0.939m for the baseline, and each carried a Sharpe ratio above 0.5.
Fifth percentile outcomes for the three defensive assets sat between US$0.457m and US$0.458m, against US$0.414m for the baseline.
Splitting the 10 percent evenly between one growth asset and one defensive asset produced mixed results.
Pairing venture capital with private debt, infrastructure, or real estate raised the Sharpe ratio to between 0.497 and 0.499, above the 0.493 recorded for venture capital alone, and cut term volatility.
The same pairings with private equity returned Sharpe ratios of 0.515 to 0.517, below the 0.531 for private equity on its own.
Doubling the single-asset allocation to 20 percent lifted private equity's average end value to US$1.684m and its Sharpe ratio to 0.61, while term volatility rose 3.79 percent to US$1.014m relative to the 10 percent case.
Shortening the equity-to-bond transition from 10 years to five raised the average end accumulation value by between 22 percent and 26 percent across every fund tested, the report finds, and raised term volatility.
Cutting the accumulation period from 40 years to 30 reduced the average end value by around 65 percent.
Pang says in the CFA Institute release announcing the research that the modeling found no single formula, since results changed with the asset class, its interaction with public assets, and the fund's glide path.
The accumulation period, he said, "could have a larger effect than the private market allocation itself."
The report tracks regulatory activity across four jurisdictions.
The US Department of Labor proposed a rule on 30 March 2026 setting out a fiduciary framework for alternative investments in 401(k) plans.
The UK Mansion House agreement commits the largest pension providers to allocate 10 percent of defined contribution default funds to private markets by 2030, with at least 5 percent in UK private assets.
Hong Kong SAR's Mandatory Provident Fund Schemes Authority opened access to listed private equity funds in May 2025 with a cap of 10 percent of a fund's net asset value, and the Australian Prudential Regulation Authority set expectations on unlisted asset valuation and liquidity through its December 2024 thematic review.
Olivier Fines, CFA, head of advocacy and policy research at CFA Institute, says in the release that policymakers across several major markets are creating avenues for retirement savers to gain exposure to private assets.
But he says "opening access is not the same as improving retirement outcomes."
Contributions were modelled from age 25 to age 65 on a starting salary of US$25,000, with a combined employer and employee contribution of 10 percent, equal to US$208.33 a month in year one and rising with assumed salary growth of 2.5 percent a year.
The authors describe their assumptions as broadly representative rather than jurisdiction specific, and state that end accumulation values are nominal rather than inflation-adjusted.
Private market returns came from PitchBook global indexes of closed-end drawdown funds, net of fees and desmoothed using the method set out by Geltner in 1993.
The modelling excludes plan administration costs, individual service fees, transaction costs, trading costs, and rebalancing costs.
