As defined contribution plans shoulder an ever-greater share of retirement responsibility, plan sponsors are reassessing whether public markets alone can deliver the long-term outcomes participants need. With time horizons stretching decades and contribution flows occurring through multiple market cycles, interest is growing in whether private markets, long a staple of defined benefit plans and institutional portfolios, can play a constructive role in DC investing.  

Sara Shean, Head of Institutional Defined Contribution, PGIM, has been at the center of that conversation, helping sponsors navigate both the opportunities and perceived challenges of incorporating private real estate and other alternatives into DC plans.  

Shean shares how private assets can enhance diversification and long-term return potential, what fiduciaries need to get right on liquidity and transparency, and where adoption is most likely to accelerate next. 

CM: How do you frame the case for private markets in DC plans when speaking with plan sponsors and consultants for the first time?  

SS: I usually start by recognizing that defined contribution plans are now doing the heavy lifting in retirement savings, but their investment menus have room to diversify. Most participants are still relying on traditional public market exposures while institutional portfolios have benefited from private asset exposure for decades. 

Private real estate, in particular, offers exposure to income-producing, tangible assets that behave differently than public securities. The conversation isn’t about novelty. It’s about modernizing DC plans so participants can benefit from the same types of diversified building blocks that pensions and endowments have used for decades, with the right governance and structure in place.  

CM: How do you define “success” for alternatives in DC: higher returns, smoother ride, better retirement income, or something else?  

SS: Success in DC isn’t about one metric. It’s about whether the portfolio is aligned with desired retirement outcomes. If alternatives can help smooth the participant experience through market cycles and support income growth as people approach retirement, that’s meaningful. Ultimately, success is whether these investments help participants stay invested, manage risk, and improve their chances of meeting long-term goals. For private real estate, that often means contributing stable income, diversification, and inflation resilience over long time horizons.  

CM: Where does private real estate specifically add value within a DC lineup relative to public REITs and core fixed income?  

SS: Private real estate can play a complementary role. Compared to public REITs, it’s typically less tied to daily market sentiment and public equity volatility, but together, public and private real estate exposure pair nicely to provide valuable liquidity for DC portfolios. Relative to core fixed income, it can offer income potential with inflation sensitivity, backed by physical assets. Particularly within a professionally managed solution, private real estate in DC plans can help balance growth-oriented assets with income and diversification.  

CM: What are the most common misconceptions or objections you hear from investment committees about private markets in DC plans?  

SS: The most common concerns tend to be around liquidity, valuation, fees, and perceived litigation risk. In reality, many of the operational concerns have been tackled by the industry over the past decade. Private real estate strategies designed for DC today can offer daily valuation, daily trading, third-party daily valuation and increased transparency, while still delivering the benefits of a private asset.  And many funds have over 10 years of history operating in the DC space. The hesitation is often less about feasibility and more about familiarity.  

CM: How do you respond to concerns around fees, complexity, and fiduciary risk in the 401(k) and 403(b) context?  

SS: With private real estate, fees need to be evaluated in the context of net-of-fee outcomes, diversification benefits, and income generation, not just in comparison to low-cost public market exposures. From an implementation standpoint, the goal is for these investments to look and feel like any other DC option with daily pricing, clear reporting, and seamless integration into multi-asset solutions. From a fiduciary perspective, what matters most is a deliberate, well-documented process focused on participants’ best interests. Specific to the 403(b) market, regulations allowing a broader set of investment vehicles, including CITs, would allow for more seamless integration of private assets into those plans.  

CM: What role does education—for sponsors, advisors, and participants—play in overcoming these perceived barriers?  

SS: Education is essential. Plan sponsors and advisors need clarity on how these assets behave, how they’re valued, and what role they play in a DC portfolio. Participants don’t need to understand the specifics of each private asset class when they are wrapped into a multi-asset solution such as a target date fund, but they do need to understand why the investment is there and how it supports long-term outcomes. Clear, consistent education builds confidence and helps align expectations, which is critical when introducing any asset class into a DC plan.  

CM: How can sponsors start small and scale over time, rather than feeling they must make a “big bang” allocation to private markets on day one?  

SS: Private real estate is typically introduced through diversified, professionally managed solutions such as target date funds, managed accounts, or real asset portfolios, rather than as a standalone option. That structure allows sponsors to start small, evaluate outcomes, and scale thoughtfully over time as comfort and experience grow.  

CM: If you could leave plan sponsors with one takeaway about integrating private real estate and other alternatives into their DC strategy, what would it be?  

SS: Integrating private real estate and other alternatives into DC strategies isn’t about adding complexity. It’s about adding much-needed diversification. When designed responsibly, this can help DC plans better provide enhanced growth and/or income, diversification, and resilience that support participants throughout their retirement journey.