The real deal: Evaluating real assets strategies for DC plans

It is no surprise that effective diversification remains one of the most useful tools plan sponsors have to help strengthen potential retirement outcomes for members. So why do so many members still remain so poorly diversified?

As of June 30, 2020, the vast majority of US defined contribution (DC) assets were invested in target date funds (30.7%) as well as traditional US equity (33%), stable value (10.2%), and US fixed income (6.9%). Less than 1% was invested in expanded “portfolio diversifier” categories, such as Treasury Inflation-Protected Securities (TIPS), real estate, and alternatives.¹ That is in sharp contrast to similar retirement plans abroad, such as Australia’s arguably more developed DC system that, on average, held alternatives allocations of approximately 22% as of June 30, 2020.²

The category covers a wide range of investments, including global infrastructure, real estate, and commodities. TIPS are also frequently included in diversified real assets portfolios, given their link to inflation.

Today, DC plan sponsors can choose from a range of diversified real assets solutions to help offer members an efficient way to tap into this compelling set of diversifiers — all packaged together in one easy-to-access, professionally managed investment solution.

In this article, we dive into three compelling investment characteristics of real assets: income, diversification, and returns.

Learn more about real assets, including the three questions to ask to determine if real assets are right for your plan.