Private Capital in DC Plans May Reach $1T by 2030, per Deloitte

Nearly two months since the Department of Labor proposed a rule to facilitate the inclusion of alternative assets as investing options in U.S. defined contribution plans, analysts are grappling with what the future of DC plans could look like. According to Deloitte Insight’s “FSI Predictions 2026,” adoption is expected to remain limited for the rest of the year, but allocations could approach 2% by 2027 and continue increasing from there.

The paper estimated that with reallocations to target-date funds in DC plans, private capital assets in DC plans could reach $1 trillion by 2030, representing approximately 6% of assets under management for all private U.S. DC plans.

The DOL’s safe harbor rule enables fiduciaries to include investments such as private equity and private credit within diversified, professionally managed solutions such as target-date funds, if their process includes consideration of six key factors. Taking the new rule into account and assuming steady growth in U.S. DC plan assets, Deloitte provided two possible scenarios as to how the adoption of private capital in U.S. DC plans could take form—mass support for the investments or more cautious adoption.

Enthusiasm or Hesitation?

The baseline scenario assumes that plan fiduciaries grow more comfortable with the inclusion of private assets within plans and that there is a continued evolution of product design. Challenges in this scenario include market volatility affecting parts of private capital such as direct lending and liquidity concerns influencing adoption.

In this scenario, other asset classes such as private equity and infrastructure would perform more resiliently, and larger plans would drive adoption. Advisers would show mass support for the investments, TDFs would become the early delivery mechanism, and collective investment trusts quickly follow. Alternative investments exposure would then become embedded, primarily supported by custom implementations in larger plans and complementary use of managed accounts, leading to gradually scaling allocations that remain consistent with fiduciary standards. Momentum would continue, with several large asset managers and target-date providers partnering to provide private market options.

Deloitte’s conservative scenario presumes that plan adoption of private asset investments will be constrained by litigation concerns, fee sensitivity and operational complexity.

Plan sponsors would then hesitate to include alternative exposure within TDFs, but managed accounts could prove to be an alternative. However, in this scenario, without private capital embedded in TDFs, Deloitte predicted that overall adoption would be more gradual and concentrated among higher-balance participants and larger plans.

The Forecast

According to Deloitte, the projected 6% allocation to private capital in DC plans by 2030 could result in assets being concentrated in default-oriented structures such as TDFs, with growth coming from persistent contributions, rather than menu redesign.

Deloitte demonstrated its contention that private capital exposures can be delivered through an existing TDF structure with allocations to non-U.S. and U.S. equities and bonds.

Deloitte indicated that the 6% private capital placement would draw equally from U.S. equity and non-U.S. equity allocations. The expected private capital allocation would be made up of mostly private equity (43%) and private debt (20%).