Many defined contribution (DC) plan sponsors have asked about private equity (PE) due to a recent Information Letter provided by the U.S. Department of Labor. While we recommend private equity to many institutional investors, several challenges make it particularly difficult for the majority of DC plans. A small number of DC plans in the U.S. can overcome the challenges and successfully implement private equity as part of multi-asset funds like target date funds, but there will be a lot of near-term challenges to work through. For DC plan sponsors interested in diversifying assets beyond traditional public equities and fixed income and specifically into private assets, we see private real estate as a primary step in this journey.
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