The U.S. defined contribution retirement savings system, primarily based on 401(k) plans, holds significant global financial assets. Innovations like automatic enrollment and target date funds have improved participation over decades. However, investment allocations remain limited to public stocks and bonds. A changing financial landscape with higher interest rates necessitates alternative investments. Private market assets like real estate and private equity provide unique returns and should be accessible to 401(k) savers for improved retirement outcomes. Public pension funds have already successfully engaged with these markets, suggesting a pathway for DC plans.
U.S. DC investment allocations have been limited to investing only in publicly traded stocks and bonds, missing out on private market opportunities like real estate and private equity.
401(k) portfolios traditionally relied on falling interest rates and rising equity prices for returns, a situation that may no longer suffice in today's financial climate.
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