Investors participating in a 401(k)s and other workplace retirement savings plans would like the option to add alternative investments to their portfolios, even though many don’t understand the benefits, according to the Schroders 2024 U.S. Retirement Survey.
Fifty-one percecnt of all plan participants indicated that they don’t understand the benefits of adding alternatives to their retirement portfolio, and 64% said alternative investments sound risky.
The nationwide survey, conducted in March and April, included 2,000 U.S. investors aged 28 to 79, of which 780 participated in a workplace retirement plan.
Thirty-six percent of the investors expressed interest in investing in private equity and private debt investments if their plan provided access to these assets. Further, 80% said having such access would lead them to increase the amount they are contributing to the plan.
In terms of how much private assets they would invest, 52% would allocate less than 10%, 34% would allot between 10% and15% and 8% would allocate more than 15%.
“Alternative investments such as private equity and private debt have long served as important portfolio diversifiers in defined benefit plans,” Deb Boyden, Schroders head of U.S. defined contribution, said in a statement. “Given the evolution of the asset class in recent years, it’s a matter of when, not if, these investments will become more common in defined contribution plans,”
She added, “Before private assets can reach their full potential, significant inroads in participant education must be made.”
