ALTERNATIVES IN RETIREMENT

“Alternatives” refer to private market investments, or alternative investments—such as private equity, private credit, and real assets—integrated into professionally managed defined contribution (DC) solutions (e.g., target date funds (TDFs) or managed accounts) often delivered through collective investment trusts (CITs).

iCapital brings private‑markets know‑how to DC. We help asset managers, advisors and consultants, recordkeepers, and plan sponsors integrate alternatives through DC‑ready structures, scalable technology, and role‑specific education, built on years of experience serving the broader private markets.

Including private markets expands the investment toolkit for the largest population of savers in the United States, giving individual participants access to the same strategies institutional investors have used for decades to achieve diversification and return objectives.

Private markets offer more options for diversification, potential for enhanced returns, and improved risk-adjusted outcomes when implemented responsibly under ERISA guidelines. By adding exposure to additional assets beyond traditional stocks and bonds, participants can reduce reliance on public markets and may build more resilient portfolios.

Yes. Alternative investments such as private equity, private credit, and real estate can be included in DC plans through diversified, professionally managed options like target date funds (TDFs) or managed accounts. Fiduciaries must follow ERISA standards and Department of Labor (DOL) guidance to ensure prudent oversight, liquidity management, and participant protection.

Read the official DOL guidance letter here: Department of Labor Guidance on Private Equity Investments in Defined Contribution Plans

The DOL has confirmed that alternative investments can be included in professionally managed DC plans. ERISA does not prohibit private markets, but fiduciary oversight, governance, and participant communication remain essential.

An August 2025 Executive Order directed the SEC and DOL to further clarify rules and guidance for private market investments in retirement plans. Additional guidance on the inclusion of these investments is expected in early 2026.

Read the official Executive Order here: Democratizing Access to Alternative Assets for 401(K) Investors – The White House

Alternative investments in retirement plans are typically added to target date funds (TDFs) or managed accounts as a sleeve within multi-asset portfolios, maintaining liquidity and valuation standards for DC plans. Portfolio managers may include private market assets as modest allocations only when they improve overall risk-adjusted outcomes.

These allocations are often delivered through collective investment trusts (CITs), which simplify integration, valuation, and disclosures while meeting ERISA requirements. This approach supports fiduciary oversight and gives participants institutional-quality diversification within 401(k) plans.

Adding alternatives requires recordkeeper integration, compliance workflows, and participant disclosure. Key steps include periodic valuation, liquidity management, data integration for reporting and disclosures, and coordination among managers and service providers.

The infrastructure already exists: CITs can wrap alternative strategies for inclusion in target date funds or managed accounts, aligning with current recordkeeping and compliance systems. This approach enables scalable adoption without disrupting existing frameworks and maintains ERISA compliance.

No. Daily valuation (NAV) and daily liquidity (trading) are distinct, and neither is required by law. ERISA requires appropriate valuation and disclosure, not daily pricing for every sleeve. In multi‑asset DC structures (e.g., target date funds or managed accounts), the fund may publish a daily NAV while an alternative sleeve is valued periodically (monthly or quarterly). Participants may have daily liquidity at the fund level—fulfilled from the portfolio’s liquid portions—without trading the underlying alternative sleeve.

While private market investments may have different cost structures than traditional public‑market options, the potential advantage lies in their ability to enhance risk‑adjusted returns over decades of savings. In professionally managed, diversified DC portfolios (e.g., target date funds or managed accounts), sponsors should evaluate net, risk‑adjusted outcomes at the overall portfolio level—not a single fund’s fee in isolation. Retirement plans are built for the long term, making them an ideal setting for modest allocations to alternative investments that complement traditional holdings and may improve total‑portfolio results after fees.

Risk should be evaluated at the total portfolio level, not only at an individual sleeve or fund. While some private‑market asset classes may introduce specific risks, a diversified, professionally managed DC portfolio (e.g., target date funds or managed accounts) can balance those exposures with other assets and may improve risk‑adjusted outcomes over time. Managers use allocation limits, liquidity controls, and ongoing rebalancing within ERISA‑aligned processes to manage exposure responsibly and support participant objectives.

The same fiduciary practices used for any DC option apply. Sponsors generally evaluate alternatives through a documented process, consider portfolio‑level (net, risk‑adjusted) outcomes, confirm liquidity/valuation practices, and maintain governance records—consistent with day‑to‑day oversight.

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