New research from the CFA Institute Research and Policy Center finds that modest private market allocations can improve risk-adjusted performance in a modeled defined contribution (DC) plan, although the source of the improvement differs by private market asset class and the fund’s overall design.
The research, “Private Markets in Retirement Plans: Returns, Risks, and the Importance of Plan Design,” models regular contributions to a DC retirement portfolio comprising public equities, fixed income and private markets. The analysis compares allocations to private equity, private debt, infrastructure, real estate and venture capital alongside public equity and fixed income in a stylized target-date fund to examine how each could affect long-term retirement outcomes. The results illustrate that some private assets increased growth potential, while others reduced the volatility of end accumulation values under different private market allocations.
Olivier Fines, head
