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CONTRIBUTORS

Tony Davidow, CIMA®

Senior Alternatives Investment Strategist
Franklin Templeton Institute

In this latest episode of the Alternative Allocations podcast series, I sat down with Patrick Arey from Empower to discuss the addition of private markets in defined contribution (DC) plans. This exciting new development has been gaining momentum over the last several years.

I began by asking Pat about the differences between defined benefit (DB) plans, which have historically made big allocations to private markets and DC plans, which have been slow to embrace private markets. Pat commented about the maturity of the DB marketplace and the relative newness of DC plans. He noted that the DC marketplace often lags DB plans and tries to emulate their best practices.

How Institutions Allocate to Alternatives

Alternatives Diversification Among Institutional Investors
As of December 31, 2023

Sources: Preqin. Analysis by Franklin Templeton Capital Market Insights Group.

Notes: Investors are selected from Preqin’s database that have between 98% and 102% in the sum of total allocation and have a 3% absolute difference between alternative allocation and the sum of the underlying alternative asset classes (both criteria imposed to allow for rounding errors and completeness).

Because of the historical results of many private market investments, DB plans felt comfortable allocating increasing amounts of capital to the private markets, and many retirees reaped the benefits over time.

We discussed some of the challenges associated with adding private markets, from product structure to liquidity to fiduciary responsibilities and investor education. Pat noted that, “. . . we work with fiduciaries and provide guidance to them about using these investments in the plan. So, for us, it's important to ensure that the trust companies that they're working with have experience working with these investments.” 

We discussed the important role that advisors play. “They're a critical piece to the puzzle, both in terms of the process in evaluating and offering some of these products, as well as partnering with us as a recordkeeper and ensuring that education is done in an appropriate way to both.”

Pat shared recent Empower research.1 “We recently did a survey of advisors, and we found that 68% of the advisors that we work with today are using private market strategies predominantly in the wealth space, and nearly 60% of those advisors would feel comfortable with recommending private markets to retirement plans.”

We discussed the asset allocation ranges for private markets in DC plans, and while all plans are different, Pat noted that he is seeing products with 10%-15% allocations—although some of the larger plans have substantially higher allocations.

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Endnotes

  1. The Empower private market investment advisor survey was conducted from July 15-July 22, 2025, through an online survey that received 237 responses.

 

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