Defined contribution (DC) plans have shifted investment and longevity risk from employers to individual retirement savers. As policymakers and plan providers consider expanding access to private markets, fiduciaries must determine whether these assets can improve retirement outcomes without introducing costs and risks that participants may not fully understand or be able to bear.
“Private Markets in Retirement Plans: Returns, Risks, and the Importance of Plan Design”examines how five private market asset classes (private equity, private debt, infrastructure, real estate, and venture capital) could affect end accumulations through a target-date fund (TDF). The research compares a baseline TDF invested in public equities and bonds with TDFs that maintain private market allocations over the saving period.
The report considers how different private assets affect average end accumulation values, the volatility of end accumulation values, downside and upside results, and risk-adjusted performance. It also tests whether combining growth-oriented assets with more defensive private assets changes the balance between return and risk.
The report’s central message is that private market access is not a standalone investment decision. Outcomes depend on the role of each asset class, the size of the allocation, the structure of the glide path, the length of the accumulation period, regular contributions, fees, liquidity, valuation, and governance.
