DC Employers Keen on Offering Alternatives
As the industry waits for official guidance from the Department of Labor (DOL), new research shows that employers are increasingly showing interest in alternative investments.
The latest finds from Escalent’s Pension plan for 2026 The report shows that 44% of defined contribution (DC) plan sponsors are interested in learning more about how to include private market investments in 401(k) portfolios.
This enthusiasm was particularly pronounced among large and media companies, which showed the highest levels of intrigue at 62% and 50% respectively. Employers interested in products are most receptive to private loans (75%), private equity (75%), private infrastructure (73%) and venture capital (72%), with private real estate (61%) ranking the lowest of all categories.
Plan sponsors said they were attracted by lower investment fees (35%) and diversification/downside risk management (33%). Inflation insurance/protection was the primary motivator for mid-sized plans, while large plans sought increased asset diversification/risk management and mega plans enjoyed a greater emphasis on increasing liquidity.
Much of the focus can be attributed to recent government attention. The retirement industry is still awaiting formal regulation from the DOL after a 60-day comment period that attracted almost 45,000 comments from organizations and advisors.
President Donald Trump has done it before signed the order which directed federal agencies, including the DOL, to revise past guidance on private investments in DC plans.
“The new US Department of Labor regulations have given a big boost to alternatives,” said Sonja Davis, lead author of the report and senior director of products for Escalent’s Cogent Syndicated division. “Plan sponsors now have more flexibility in deciding which asset classes are beneficial for their plans, and this has led to an influx of interest in alternatives. The industry is still in its early stages of exploration, and most sponsors are considering what types of alternative investment options are best for their portfolios. Therefore, DC registrars and investment managers will have to degree to rely on education to translate sponsor curiosity into smart adoption.”
Expanding availability has not affected all plan sponsors to include investments. Among those not interested in the product, 49% of large plans said weak member demand is holding them back from further interest.
In addition, some sponsors cited high fees and expenses as the biggest barrier to adding funds to a portfolio.
Despite some skepticism from the plan’s sponsors, the results show at least some interest among participants. Survey on The Wall Street Journalconducted by the Harris Poll, found that while nearly 40% of respondents said they had never heard of private equity funds, 59% reported a general interest in investing in funds. Another 90% admitted that they would send part of their pension savings to private investments.
The Escalent study surveyed more than 1,000 401(k) plan sponsors and compared the top DC plan sponsors and DC investment managers on brand equity and experience.
