A New Year of Evolution for Alts in DC Plans

The prospect of utilizing alternative investments in defined contribution plans has been there for years. What changed last year was the volume—and the urgency.

President Donald Trump’s August executive order directing the Department of Labor to expand—“democratize,” according to the order’s text—access to alternative assets for 401(k) investors has pushed recordkeepers, asset managers and advisers into planning mode, even as plan sponsors remain wary of the fiduciary and litigation risks that come with adding less-liquid, harder-to-value investments to a daily-valued system.

That tension—policy momentum versus sponsor caution—will define 2026, according to several industry experts. Advisers say client inquiries are rising, and the industry is building the infrastructure to make private equity, private credit and real assets work inside default solutions, likely as part of target-date funds, managed accounts or other professionally managed offerings.

According to a HarbourVest survey conducted by Censuswide, 92% of sponsors said they feel their organization’s in-house expertise is prepared to evaluate, select and manage private market investments within DC plans. In addition to confidence in private market allocations, 86% of sponsors said these allocations must be diversified to mitigate risk: 45% strongly agreed and 41% agreed somewhat. Sponsors, meanwhile, are waiting for the kind of regulatory clarity that makes committees comfortable: an operational playbook and, ideally, something that looks like a safe harbor.

A key tell for 2026 is what advisers say they will recommend. In Escalent’s Cogent Syndicated survey of 411 plan advisers, one-quarter said they are likely to recommend adding alternatives to DC plan investment lineups following the DOL’s August policy shift, and another 10% said they already do. Among the alternative categories, 43% of advisers said they already recommend or are likely to recommend private equity, 42% private credit, 39% private real estate and 32% venture capital.

A Regulatory Tailwind—With a Warning Label

Several industry experts say the executive order matters less as a one-time headline and more as a directional reset that will shape how firms plan for 2026. Drew Carrington, who leads iCapital’s alternatives in retirement portfolios strategy, calls the order a “road map” moment, adding that “the absence of access does not equal the presence of protection.”

That dual message—pro-access but not pro-blank-check—is exactly what sponsors are trying to navigate. Wilshire Managing Director and Principal Nate Palmer says sponsors are “very conservative” and highly sensitive to fiduciary risk, arguing that “safe harbors are very effective” because “protections matter.”

Palmer’s view is that the real adoption path, if it comes, will run through diversified defaults: “Is there any reason why that shouldn’t include asset classes that help improve outcomes?” Palmer asks, right before answering: “No, there is no reason why retirement plans should not include those types of asset classes.”

Product Shift: Evergreen Structures

A big reason 2026 could look different than prior “alts-in-DC” cycles is that the product tool kit is evolving. Carrington points to the rise of evergreen and semiliquid structures, arguing they move the conversation beyond “old school” private equity lockups and toward vehicles that can function inside retirement plans—even if they are not mutual funds. He also says recordkeepers are increasingly able to “accommodate investments that have differential liquidity” without breaking the system.

Last May, Empower announced it would offer private investments in its retirement plans, and Blue Owl and Voya Financial followed in July.

While the industry has shown interest in adopting private funds, Michelle Rappa, a managing director and client adviser at Neuberger Berman, says the success of adding the investments will come at the plan-design level: Smaller sponsors that cannot build full custom target-date solutions may still pursue “customized managed accounts,” through which participants access private assets only through an allocation solution.

But the questions sponsors ask, over and over, Rappa says, are about the same topics that will determine whether 2026 is a breakout year or a cautious crawl: valuation, liquidity and fees.

“They always ask about striking a daily value,” Rappa says, adding that sponsors and fiduciaries “have to understand if there are layered fees, what does that mean to their participants?”

Skepticism Remains

Not everyone is convinced that adding private assets automatically improves investment outcomes once valuation smoothing, leverage and cost are taken into account.

Jeffery Palma, senior vice president and head of multi-asset solutions at Cohen & Steers, says the industry’s go-to claim—an illiquidity premium—does not always hold up cleanly in the data.

“It’s actually not clear to me whether you’re generating an illiquidity premium,” he says, noting that some of what gets attributed to illiquidity may be driven by leverage or other embedded risk factors. He also questions whether private assets truly reduce volatility in an economic sense, arguing that lower reported volatility can mask similar “under-the-hood” risk.

Education Is Key

Advisers and consultants repeatedly return to themes that sound basic, but may be decisive in 2026, whether adoption stalls or picks up: participant education and sponsor education.

Scott Duba, chief investment officer and president of wealth management at Prime Capital Financial, says “educate, assess and advise,” are the key pillars for adding alts to DC plans, arguing that advisers must help sponsors understand both the benefits of including the offerings, such as diversification and access to private companies, as well as drawbacks, such as illiquidity and complexity.

“While it may seem unimportant for people to fully understand their investments as long as they perform, this undermines trust,” Duba says. “The more participants understand what and why they’re investing, the more confident they feel about their retirement plans. Simply saying, ‘Trust me’ is less compelling than showing them they’re investing in top American companies—some public, some private—and explaining how these opportunities work.”