Do private investments belong in DC plans? Maybe, but only after careful analysis. Explore our newest report to help plan sponsors craft an approach that’s right for their participants.
How to best add private investments to a DC plan
Plan sponsors need a framework—a clearly marked roadmap—to evaluate the relevant risks and tradeoffs of adding private investments. They can expand the opportunity set, increase risk-adjusted returns, and bolster portfolio diversification. But they also present real challenges in liquidity management, transparency and fees.
Consider target date funds as a possible first step
Many plan sponsors will first consider incorporating a sleeve of private investments within a professionally managed target date fund. The resulting mix of public and private asset classes can allow for optimal portfolio allocation over time and facilitate periodic rebalancing. Most of all: they can help deliver better retirement outcomes.
Private markets and active investing go hand in hand
Adding private investments requires plan sponsors to make a series of “active“ decisions. That means establishing a glide path and an unbiased asset allocation framework to properly scale and diversify the private market exposure. It also requires skilled bottom-up manager selection and meeting liquidity needs in dynamic markets. Choosing an experienced partner can make all the difference.