In this paper, our researcher evaluates the potential uses and downfalls of private market funds in defined contribution plans. He explores the reasons for the use of private equity and touches on the different fund structures that could be used to address liquidity and ERISA needs of defined contribution plans.

Key findings:

• Analyzing and modeling private market investments is particularly challenging because the pricing mechanism is completely different than that of public markets.
• Liquidity of private market funds presents less of a challenge, but expectations need to be positioned appropriately with a plan advisor, plan sponsor, and recordkeeper.
• Interval funds appear to be the most likely fund structure for private market funds in DC plans.

  

Author:

Hal Ratner Head of Research Morningstar Retirement

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