Private Market Investing Gaining Traction in Defined Contribution Plans
Private market investing has been a hot topic in the financial world, but it seems to have largely bypassed the approximately 130 million Americans in defined contribution plans. While institutional investors and high-net-worth individuals have been diving into private market investments, the same cannot be said for those saving for retirement through DC plans.
However, there are signs that this may be changing. A recent survey by Blackstone Private Wealth Solutions found that 90% of financial advisers have allocated some portion of their clients’ portfolios to private market investments. Additionally, BlackRock Inc. recently made a significant move by acquiring Preqin Ltd. for $3.2 billion, signaling a growing interest in the private markets data segment.
One of the main reasons private market investing has been slow to enter DC plans is due to fiduciary concerns about liquidity and the need for daily valuation. But with the potential for enhanced returns and increased diversification that private markets can offer, asset managers are beginning to advocate for offering this investment class to DC participants.
Partners Group, for example, has been offering private markets investments for DC plans through professionally managed portfolios like target-date funds or managed accounts. By utilizing a collective investment trust vehicle, they are able to address the liquidity and valuation needs of DC plans while providing access to private market opportunities.
While only a small percentage of DC plans currently offer alternative investments like private equity, there is growing interest in incorporating these options. Advancements in DC investment systems and technology may pave the way for private investments to become more accessible to qualified plans in the future.
Educating both professional buyers and individual investors on the value of private market asset classes will be crucial in driving adoption in DC plans. With the necessary structural innovations in place, it’s now a matter of execution to bring private market investing to a wider audience.
As the landscape of retirement savings continues to evolve, it will be interesting to see how private market investing becomes more integrated into DC plans, providing participants with new opportunities for portfolio diversification and potential growth.
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