Private credit is getting closer to your 401(k)

Whether your retirement plans involve a lake house, a beach chair, or simply never opening Slack again, you might want to take a peek inside your 401(k). Wall Street has been trying to sneak some private credit into the mix, and it may soon have a wider path in.

There’s plenty of money to chase: Americans held $15 trillion in defined-contribution retirement plans at the end of June, including $10.8 trillion in 401(k)s. But one major obstacle has kept many employers on the sidelines: If those investments go south, companies could face class-action lawsuits from workers who say their retirement savings were put into imprudent investments.

That’s why the Anderson v. Intel case now before the Supreme Court matters to investors. It stems from Intel’s decision after the financial crisis to put portions of employee retirement funds into risky options like private equity, hedge funds, and commodities. A former employee argued that those investments underperformed conventional alternatives and that Intel breached its fiduciary duty.

But several justices appeared skeptical Tuesday that underperformance alone should be enough to keep such a lawsuit alive—which could raise the bar for similar cases.

Wall Street has been building the on-ramp

Private-market firms haven’t been waiting for the courts to greenlight their path into retirement portfolios. Empower has already teamed up with Apollo, Blackstone, Goldman Sachs, PIMCO, and others to offer retirement plans access to private assets. BlackRock and Great Gray have built target-date products with private equity and private credit, while Capital Group and KKR are developing similar offerings.

The policy backdrop has moved their way, too. Last year, the Trump administration directed regulators to expand access to alternative assets in defined-contribution plans, and the Labor Department withdrew guidance that had taken a more cautious approach to private equity in 401(k)s.

Private credit’s credibility problem

The timing is awkward. Private credit has spent the past year lurching from one concern to the next, from Jamie Dimon’s “cockroach” warning about hidden credit problems to AI fears hitting software borrowers and, more recently, a rush to finance the massive data-center buildout.

Last week, Blue Owl Capital once again limited redemptions from two of its private credit funds at 5%, as fears around AI kept requests at its flagship technology fund well above industry peers.

Together, those episodes have sharpened concerns about private credit’s opaque valuations, limited liquidity, lending standards, and how borrowers hold up under stress.

For retirement savers, that makes the Supreme Court case more than a Wall Street story. Private credit can offer additional income and diversification, but those benefits may increasingly come bundled inside the target-date funds and managed portfolios workers already contribute to every paycheck.

In other words, watch out: The next private-credit investor might not be a Wall Street pro—it could be you, on autopilot.—HC