Private markets in retirement plans: A fiduciary framework for evaluation and implementation

Abstract

Recent regulatory initiatives have renewed interest in incorporating private markets into U.S. defined contribution plans. The central question, however, is not whether such assets should be categorically permitted, but how plan fiduciaries can evaluate and implement them prudently. This article develops a practical framework organized around six factors identified in the U.S. Department of Labor’s proposed rule: performance, fees, liquidity, valuation, meaningful benchmarks, and complexity. While defined benefit plans have allocated significant capital to private markets, there are differences between DB plans and DC plans. Research suggests that private-market exposure is appropriate when embedded within professionally managed, diversified vehicles supported by reliable  liquidity management, valuation, benchmarking, and monitoring procedures.