Private Assets in DC Plans

Private assets can diversify DC plan portfolios beyond public markets and may improve long-term risk-adjusted returns. Private credit and real assets may also contribute more consistent income and potential inflation resilience, complementing traditional stock-and-bond allocations. DC implementation requires careful attention to daily liquidity expectations, valuation and benchmarking limitations, participant disclosures, and fee reasonableness on a net-of-fee basis.

The most common approach is to embed private-market exposure inside professionally managed, multi-asset solutions such as target date funds and managed accounts. Plan sponsors that pair strong governance and documentation with fit-for-purpose vehicles (e.g., CITs and semi-liquid/evergreen structures) are best positioned to capture benefits while managing fiduciary and operational risk.

Liquidity and Daily Valuation Needs

Sponsors can address liquidity and daily valuation needs by using multi-asset strategies that blend public and private holdings to maintain overall portfolio liquidity. Vehicles such as CITs and evergreen-style structures can further support frequent pricing and transaction needs when they are designed with appropriate valuation processes and liquidity management features.

Fee Sensitivity and Cost Management

To manage fee sensitivity, sponsors can negotiate pricing structures that fit the DC context and keep the analysis focused on net-of-fee outcomes. Using more cost-efficient vehicles (including CITs where appropriate) and reviewing fee arrangements regularly can help ensure participants receive an acceptable value-for-cost relationship.

Regulatory and Fiduciary Uncertainty

Sponsors can reduce regulatory and fiduciary uncertainty by monitoring DOL guidance and other developments and by documenting decisions, assumptions, and monitoring practices. Fiduciaries should also confirm they have the expertise (internally or through advisors) to evaluate private-market risk/return characteristics, fees, liquidity, valuation practices, and disclosure requirements.

Operational Complexity

To manage operational complexity, sponsors can rely on professionally managed multi-asset portfolios (such as target date funds and managed accounts) that provide integrated oversight and risk management. Sponsors generally avoid stand-alone private options that can be difficult for participants to evaluate and that can create additional operational and fiduciary burdens.

Benchmarking and Performance Measurement

Benchmarking can be improved by selecting managers with transparent valuation methods and clear reporting, then reviewing results using appropriate comparison tools such as public-market equivalents. Regular monitoring helps ensure performance and risk remain aligned with plan objectives and provides a clearer story for fiduciary oversight and participant communications.

Participant Communication and Education

Sponsors can strengthen participant communication by providing plain-language explanations of what private assets are, why they are included, and how liquidity, valuation, and fees work in the selected vehicle. Educational resources and required disclosures should be designed to help participants make informed decisions and interpret performance appropriately.

Manager Selection and Performance Dispersion

Given meaningful performance dispersion in private markets, sponsors should conduct thorough due diligence on managers, including their track record, investment process, risk management, governance, and transparency. Ongoing monitoring is equally important to ensure the manager continues to execute as expected and remains suitable for a DC implementation.

Conclusion

Private assets (including private equity, private credit, and direct private real estate) are being considered more frequently in the defined contribution (DC) context.  Adoption has historically been constrained by cost, liquidity, operational, and regulatory hurdles. Momentum is building as sponsors, consultants, and policymakers explore ways to address daily valuation and participant-transaction requirements through improved structures, clearer guidance, and better-aligned vehicles.

Bridgebay Financial, Inc. advises employer retirement plans including 401(k), 403(b), 457, profit-sharing, and defined contribution plans—on investment policy statements, committee charters, asset allocation, investment style selection, fund selection, ongoing monitoring, and provider evaluation. The firm’s advice is delivered through consultations with Retirement Committees and does not involve discretionary account management services.  Bridgebay creates Investment Policy Statements that provide a disciplined framework for plan governance, due diligence, and compliance with ERISA, DOL, and other regulations.  These policies set plan objectives, authorities, responsibilities, and controls, and are reviewed annually to help fiduciaries fulfill their responsibilities.  

Bridgebay conducts asset allocation and gap analyses to ensure fund lineups are diversified, efficient, and meet 404(c) requirements, identifying gaps or redundancies in fund offerings.  The firm evaluates fund menus for cost-effectiveness, asset class representation, and alignment with participant demographics and preferences, including socially responsible investments.  Advanced quantitative tools are used to assess target date and target risk funds, comparing them to benchmarks and peers to help sponsors understand performance.  Fee analysis is a core service, with Bridgebay ensuring fee transparency, benchmarking expenses, and assisting sponsors in renegotiating or recapturing fees for improved plan value.  

Ongoing monitoring are emphasized, with quarterly reviews and user-friendly reports provided to Retirement Committees.  Bridgebay’s proprietary scoring system, proactive meetings, and vigilant oversight support prudent governance and help plan sponsors make informed decisions.