US Council of Economic Advisers estimates defined contribution plan access to private equity could boost GDP by up to USD 35 billion

The US Council of Economic Advisers published a research paper assessing the implications of broadening retail investor access to alternative investments through defined contribution retirement plans, with a focus on private equity. It concludes that allowing defined contribution plans to allocate to alternatives could improve participant outcomes and provide a larger, more stable capital base for private market fund managers and private companies. The analysis finds that allocating to private equity increases portfolio risk-adjusted returns (Sharpe ratio) and boosts retirement wealth across age cohorts, with larger gains for younger participants. The two youngest cohorts are estimated to see around a 2.5 percent increase in annuitized lifetime income, compared with roughly 0.5 to 1 percent for the two oldest cohorts. The paper estimates a GDP benefit of up to USD 35 billion, or 0.12 percent of GDP, from expanding access to private equity alone, and notes potential additional benefits from expanding access to other alternative investments such as hedge funds or venture capital.