How alternative investments are innovating DC retirement plans
Private asset alternative investments have generally outperformed traditional assets for decades,¹ but have been largely absent from 401(k)s. Now that’s changing. Discover how adding alternatives to defined contribution (DC) plans can help enhance diversification, lower overall volatility, and help improve participant outcomes.
How alternative investments differ from traditional stocks and bonds
Private asset alternatives are a subcategory of alternative investments, which are assets that fall outside the traditional categories of publicly traded stocks, bonds, and cash. Since these assets are bought and sold in private markets, their securities aren’t subject to the daily market swings that affect publicly traded stocks and bonds. So, when they’re added to a traditional, diversified portfolio, private asset alternatives can help smooth out volatility over time.
Another key distinction is liquidity. While traditional assets are generally highly liquid, private asset alternatives are subject to deposit and redemption restrictions that limit how quickly investors can sell them. In exchange for committing capital for longer periods, private asset alternative investors can earn an additional return, known as an illiquidity premium.
Common types of private assets
| Asset type | Investment focus |
| Private equity | Invests in private companies, projects, or properties with the potential for capital appreciation and illiquidity premiums |
| Private credit | Lends money to private companies in return for interest payments and repayment of principal at maturity |
| Infrastructure | Invests in public assets, such as transportation and utility networks, which can offer inflation protection and income |
| Real estate | Invests in physical properties, such as apartments, commercial buildings, or land, which can provide income and capital appreciation |
Factors driving the growth of alternatives in retirement plans
An asset category once limited to qualified investors and institutions, including defined benefit plans, is now opening to DC plans. Several factors are driving this trend.
- Longevity—The number of people living to 100+ is expected to quadruple over the next 30 years.2 As lifespans rise, DC sponsors, financial professionals, and participants are seeking more resilient, long-term investment strategies that can help fund retirements that could last 30 to 40 years.
- Proven track record—U.S. private equity generated the highest returns of any asset class over 5-, 10-, 15-, and 20-year investment horizons.1
- Potential new sources of alpha—In the U.S., 86% of companies with annual revenues of more than $250 million are privately held.3
- Interest from financial professionals—More than 40% of advisers already recommend or are likely to recommend private equity and private credit for DC plans.4
- Participant awareness—In 2025, 45% of participants said they’d invest in private debt or private equity if their workplace plan offered them, up from 36% in 2024.5
- A favorable regulatory environment—Following a mid-2025 executive order to democratize access to alternative assets, the U.S. Department of Labor (DOL) began easing regulatory barriers that have largely kept DC plan fiduciaries from offering alternative investments.
- While ERISA has always allowed alternative investments in DC plans, earlier this year, the DOL issued proposed regulations to provide a clearer framework for plan fiduciaries. Key points include:
- A process-based safe harbor that outlines how to prudently evaluate and select alternative investments, offering fiduciaries protection from litigation risks.
- Generally, alternative investments should be offered in professionally managed, diversified vehicles such as target-date funds (TDFs) rather than as standalone options.
- Fiduciaries are responsible for managing participant redemption needs, even when offering alternative investments with lower liquidity, such as private equity or real estate.
How plan sponsors can access alternative investments in 401(k) plans
Plan sponsors can access alternative investments through professionally managed, diversified vehicles, such as target-date funds, often packaged as collective investment trusts (CITs), managed accounts, and advisor-managed accounts. Investment professionals who understand the complexity, valuation, and liquidity nuances of alternatives are best positioned to structure and oversee these vehicles.
Plan sponsors can work with their financial professional, recordkeeper, and investment manager(s) to select the appropriate implementation approach based on their plan size, fiduciary capabilities, and participant needs.
How private asset alternatives can improve retirement portfolio performance
Private asset alternatives bring several benefits to traditionally diversified retirement portfolios.
- May improve participant outcomes—When a 10% public equity sleeve was replaced with private equity in a DC TDF, annual returns increased by approximately 22 basis points (0.22%) and improved outcomes for nearly 80% of participants over a 10-year period.6
- Enhances diversification—Private asset alternatives don’t move in the same direction as public markets, helping balance portfolio losses from public-market downturns.
- Access to new growth opportunities—The number of U.S. public companies has declined by nearly 50% since the 1990s.7 More early-stage and innovative companies are staying private, creating new growth opportunities for private asset investors.
- Long-term return potential—Private asset alternatives have long-term investment horizons tied to illiquidity premiums, which can provide additional return over time.
The next innovation in retirement planning
Private asset alternatives are innovating DC plans by boosting diversification, reducing volatility, and potentially enhancing long-term participant returns. New regulations, including safe harbor provisions, along with DC-compliant options such as target-date CITs, are helping democratize access to alternative investments. Plan sponsors and financial professionals can work together to determine how to integrate alternative investments into their plans to help improve participant outcomes.
1 “Private equity delivers stronger long-term returns than any other asset class,” American Investment Council, 12/8/25. 2 “U.S. centenarian population is projected to quadruple over the next 30 years,” Pew Research, 1/9/24. 3 Capital IQ, June 2024. Represents the share of companies based on the total number of public and private companies in North America, Europe, and Asia that have reported 2024, 2023, 2022, or 2021 fiscal year revenues greater than $250 million per Capital IQ’s company database. 4 “Outlook: Alts in DC plans move from ‘Can we?’ to ‘How do we do it safely?,’ PLANSPONSOR, 12/19/25. 5 “Private markets in workplace retirement savings plans,” Schroders U.S. Retirement Survey, 2025. 6 “Has the lack of asset diversification in DC retirement plans been a costly missed opportunity?,” Georgetown University, 6/23. 7 “The decline in U.S. stocks to choose from: what it means for investors,” Forbes, 2/3/25.
FAQs
What are private asset alternative investments?
Non publicly traded assets—such as private equity, private credit, real estate, and infrastructure—are accessed through private funds or institutional vehicles rather than public exchanges.
Why consider private asset alternatives in DC plans?
They can help enhance diversification, reduce overall volatility, and potentially improve long-term outcomes for participants.
How can sponsors add alternatives to 401(k)s?
Consider DC-friendly structures—typically target-date funds structured as collective investment trusts, managed accounts, and advisor managed accounts—and follow a prudent fiduciary process aligned with ERISA guidelines.
What’s driving the momentum now?
Favorable regulatory news, growing advisor and participant interest, and the need for more resilient savings as life expectancies increase have been supportive of adding alternative assets to DC plans.
Important disclosures
Important disclosures
The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made.
This material is not intended to be, nor shall it be interpreted or construed as, a recommendation or providing advice, impartial or otherwise. John Hancock and its representatives and affiliates may receive compensation derived from the sale of and/or from any investment made in its products and services.
Diversification does not guarantee a profit or eliminate the risk of a loss.
Alternative investments by their nature involve a substantial degree of risk, including the risk of total loss of an investor's capital. Further, alternative investments are subject to less regulation than other types of pooled investment vehicles, may be illiquid, and cannot assume that investments in the asset classes identified will be profitable or that decisions we make in the future will be profitable. Alternative investments may also involve significant use of leverage, making them substantially riskier than other investments.
Collective investment trusts are privately offered. Information on this investment is not available in local publications.
A Collective Investment Trust (CIT) is a pooled investment vehicle that is maintained by a bank or trust company for the collective investment of certain qualified retirement plans only. CITs cannot be publicly marketed or sold. CITs are exempt from registration under the federal securities laws and exempt from the regulatory requirements on mutual funds under the Investment Company Act of 1940; however, they are subject to federal and state regulation under the banking laws, the Employee Retirement Income Security Act of 1974, the Internal Revenue Code, and certain securities laws. A mutual fund is a publicly traded pooled investment fund that are offered through registered investment companies overseen by the US Securities and Exchange Commission. A mutual fund is a pooled collection of assets that invests in stocks, bonds, and other investments and is regulated by the U.S. Securities and Exchange Commission.
This information does not constitute an offer to sell units of any collective investment trust (“CIT”) and the trust is not soliciting offers to buy units of the CIT at any time in any jurisdiction where the offer or sale is not permitted. Units of a CIT are only offered to eligible qualified employee benefit plans in the sole discretion of the trustee. All information contained herein is qualified in its entirety by information contained in each CIT’s offering documents. An investor should consider a CIT’s investment objectives, risk, charges and expenses carefully before investing. Please read the offering documents, including an Offering Memorandum, Declaration of Trust, Participation Agreement and/or Fund Declaration, as applicable, copies of which are available to qualified investors upon request from John Hancock Trust Company or Global Trust Company (John Hancock Stable Value Fund). The trust document may only be available in English.
CITs maintained and distributed by John Hancock Trust Company, LLC, 197 Clarendon Street, Boston, MA 02116, 800-225-6020, jhinvestments.com.
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