A recent survey showed that roughly a third of investors using workplace retirement plans would be interested in private investment options, including private equity and private debt or credit. While this type of investing has long been a part of defined-benefit plans, private investments are rarely offered in defined-contribution plans. Many private investment offerings (which fall under the “alternative” classification) are regulated differently than public debt and equity markets.

So what does that mean for retirement plan sponsors?

Because direct investment into alternative assets can be limited to accredited investors or qualified purchasers (due to the differernt regulations we just mentioned), the easiest way to offer plan participants access will likely be through some type of managed fund or product. As with most managed funds and products, this sets up questions around prudence, performance, and fees.

The same elements that complicate alternative investing outside of employer-sponsored plans apply here—it may be harder to create a standard benchmark, for instance. Plus, alternative-focused funds tend to come with higher management fees, which will need to be explained and justified as part of fiduciary due diligence.

We suggest reading more about why you might want to include these offerings in the attached blog, read the fine print on any investment products, and consult with a fiduciary who understands both the regulatory and investment side of ERISA-regulated plans.

See the full article at BenefitsPro.com.