FOR IMMEDIATE RELEASE: July 30, 2025
CONTACT: Jarice Thompson, jarice@ourfinancialsecurity.org
Sarah Hager Mosby, shager@aft.org
Report: Private Equity Delivers High Risk, Low Returns and Costly Fees
WASHINGTON—Private equity does not deliver the superior returns that its advocates insist justify pension fund investment in this sector, and such investment would be highly risky for retail investors, according to a new report published by the AFT and Americans for Financial Reform Education Fund.
The stakes couldn’t be higher, as the Trump administration is expected to issue a new executive order that would require federal agencies to explore opening up 401(k) plans to risky private market investments. This is something the private equity industry has been lobbying aggressively for as a way to get ahold of new sources of revenue as their performance lags and some institutional investors become more skeptical.
While financial insiders and asset managers would reap the rewards, millions of workers saving for retirement would be exposed to higher risks and steep fees in products that lack basic investor protections and transparency requirements. Workers are likely to end up with the worst-performing slices of this market.
The private equity industry defends its debt-fueled leveraged buyout model as necessary to provide purportedly high yields, and it argues that expanding into other parts of the U.S. retirement system would offer advantages to more working people. But extensive data and analysis by the AFT and AFREF tell a different story:
- Private equity profitability has been in year-over-year decline for the past 20 years.
- One study found that Florida pensions would have earned a billion dollars more between 1988 and 2011 if they had not invested in private equity.
- Private equity executives frequently manipulate how they report asset values.
- Stability is a selling point for private equity, but volatility in actual asset values is just as high as in the public markets.
- The internal rate of return, the common way private equity funds report returns to investors, is an easily and often gamed measure.
- Fee structures—paid directly by investors or indirectly through portfolio companies—are prone to extensive manipulation.
- Excessive fees can also damage portfolio companies’ financial health and further hamper investor returns.
- The benchmarks that private funds use to justify their stewardship of companies are inaccurate reflections of their portfolios.
- Private equity secondary markets—a new and growing practice where an investor buys an existing interest from a limited partner investor in a private equity fund—confirm that sellers take substantial losses when they sell fund shares, calling fundamental asset values into question.
“Private equity has a track record all right: one of extracting huge fees from our members’ retirement savings and with zero transparency and disappointing returns,” said AFT President Randi Weingarten. “Rather than help workers, the Trump administration is planning to make matters worse by opening up individual retirement accounts to industry vultures.”
“The AFT fights every day to uphold workers’ retirement security. But this report reveals that private equity is simply not worth the risk, and that its growth will make it harder, not easier, for working people to retire with dignity and grace. It’s why we’re calling on pension funds and 401(k) plan administrators to demand information on fees, evaluate risk and deeply interrogate the industry’s glitzy, but wildly misleading, pitch.”
The report includes policy options for pension funds, which would mitigate the harms to retirement savings from private equity. These pension funds can:
- Use their own market power to demand meaningful information about fees, risks and returns.
- Adopt formal investment guidelines and policies—along with a clear enforcement framework—regarding how private fund managers operate portfolio companies to mitigate risk.
- Develop investment alternatives, including managing private market investments internally.
“Private equity executives have enriched themselves by the billions, taking high fees and other charges from working people’s hard-earned retirement savings in pension funds. Now they want fees from the trillions of dollars in individual retirement accounts, putting millions of more people at risk,” said Lisa Donner, co-executive director at Americans for Financial Reform Education Fund. “Meanwhile, private equity is harming workers and communities through abusive practices that too often drive businesses to bankruptcy, reduce quality of care while also increasing costs in healthcare, ratchet up the price of housing, and more. To stand up for working people and retirees, the administration, regulators and Congress need to rein in these abuses, not enable and incentivize their further growth.”
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