Private Assets an Uncertain Certainty for DC Plans

Private assets within defined contribution plans remain an anomaly. Increased private asset product launches and more research build the case for diversification within retirement plans, but implementation is far from widespread.

Mesirow Financial Holdings Inc.’s recently released “Approach to Private Assets in Defined Contribution Plans” stated that DC plans’ efficiency improved when they allocated private assets to a target-date fund strategically. Just as private equity, private credit and private real estate have anchored diversification in pensions and endowments for years, Mesirow authors suggested the same assets can live inside DC plans through target-date funds to potentially lift returns and mute volatility at the total-portfolio level.

Mesirow researchers integrated multiple private asset sleeves into their own custom target-date strategies. By sourcing private equity from large-cap equity and private credit from primarily high yield and real estate from both fixed income and equity, they saw a return enhancement and some volatility improvement.

However, private assets within retirement plans are still in early days—or, as a recent Nuveen report called it, the “why” stage.

According to Nuveen’s “2026 Retirement Outlook: Navigating the Year’s Most Critical Trends,” the current challenges of incorporating private assets include valuation methodologies, liquidity management, participant communication about less-liquid holdings and operational complexities for recordkeepers.

As product launches increase, advisers will need to familiarize themselves and their clients with the new products.

“The role of an adviser has increased in importance in basically how these particular investments are implemented. … Getting familiar with the different products, the characteristics change from one product to another,” says Keith Gustafson, Mesirow Fiduciary Solutions’ managing director of asset allocation and retirement income and a co-author of the report. “So that is a role where an adviser and their expertise will be particularly important to the plan sponsor.”

There are already multiple TDFs with embedded private asset allocations in the market that advisers can study, such as those from BlackRock and State Street.

“We expect there to be a proliferation of TDFs out there that include private assets,” says Chris O’Neill, Mesirow Fiduciary Solutions’ managing director, chief investment officer and director of quantitative research and the other co-author of the report. “I would say from an adviser’s perspective, becoming familiar with those products in order to understand what might be most suitable for their plan sponsor clients—that’s a starting point.”

Nuveen predicted that progress will be made in integrating private assets in 2026. But there remains uncertainty regarding the exact regulatory framework governing the implementation of private assets within retirement plans, following the August executive order by President Donald Trump encouraging inclusion of private investments in 401(k) plans.

Gustafson says that could be one reason why there has been an increase in attention directed to private assets with DC plans.

“The regulatory environment is more favorable; historically, regulators have been somewhat reactionary,” Gustafson says. “Now [they] have [been] a little bit more proactive in terms of promoting private markets in defined contribution plans.”

Gustafson also sees a growing demand for the investments from both the recipients—plan sponsors and advisers who manage large plan sponsors—and the suppliers.

“As the defined benefit market shrinks and the defined contribution market increases over time, it’s natural for suppliers of private capital to move toward growing markets,” Gustafson says.

Looking forward, Nuveen projected investment uptake to be gradual, as plan sponsors are naturally conservative when introducing new asset classes. However, modest allocations within existing target-date funds could provide the proof points that encourage broader adoption.

“We’re definitely in the very early innings. … We’re still in the stage of product
creation, rather than in product implementation,” Gustafson says. “Adoption usually will start with larger plan sponsors and then start to move downstream.”