Would You Like Some Private Equity in Your 401(k)?

Private equity firms, the exclusive money managers overseeing $3 trillion worldwide for wealthy investors, are taking preliminary steps to target a new type of client: ordinary people. Carlyle Group and KKR, which usually require clients to commit at least $5 million, are lowering that threshold or starting funds that can be sold directly to individuals. Blackstone Group is developing similar products, according to a person familiar with the plans, who asked not to be named because final decisions on such products haven’t been made. Their ultimate goal is a slice of the $3.57 trillion Americans have accumulated in their 401(k) retirement plans. “We definitely would like to be part of 401(k) platforms,” says Michael Gaviser, a managing director responsible for individual investor products at KKR. “We think about it every day.”

To succeed, managers will have to overcome regulatory hurdles that ban them from selling to the masses. Under Securities and Exchange Commission rules, private equity funds are available only to accredited investors, generally defined as those with a net worth excluding primary residence of more than $1 million, or those earning more than $200,000 annually.