DC Plans Warm to Private Markets, But Education Will Drive Adoption
Interest in private market investments inside defined contribution (DC) plans is gaining traction—but turning curiosity into implementation will be a slow, consultative process, according to new research from Cerulli Associates.
Findings from Cerulli Edge—U.S. Retirement Edition show that 37% of plan sponsors are very interested in learning more about target-date funds or managed accounts that allocate to private market assets. The enthusiasm is most pronounced among larger plans: 57% of sponsors overseeing $250 million to $1 billion in assets said they are very interested in exploring the approach.
Despite that momentum, Cerulli cautions that adoption will lag interest. Asset managers and DC consultants estimate that only about 7% of plan sponsors will offer a target-date or managed account with private market exposure within five years. By 2035, that figure could rise to 15%–20%, with larger plans likely to lead given their familiarity with private assets and more robust governance frameworks.
Still, structural hurdles remain. Sponsors continue to flag fees and litigation risk as primary concerns, particularly as scrutiny around fiduciary duty intensifies. Inertia also plays a role: consultants note that fewer than 5% of plans changed their target-date manager in the past year, underscoring how difficult it is to alter default investment options.
“Interest does not equal immediate adoption,” said Chris Bailey. “Sponsors are cautious about fees and legal exposure, and they rarely make changes to their target-date lineups.”
Cerulli expects target-date funds to be the first vehicle to bring private markets into the DC mainstream. Nearly 78% of plan sponsors already use a target-date product as their qualified default investment alternative, making it a familiar and scalable entry point.
To accelerate adoption, Cerulli urges asset managers to shift the conversation. Rather than competing solely on cost, firms should emphasize participant outcomes, clearly explain how private assets are accessed indirectly within diversified vehicles, and address sponsor concerns head-on.