The Goldman Sachs and T. Rowe Price partnership is the latest step to bring alternative assets to 401(k) participants — and it won’t be the last, as the industry gears up to expand the offerings. On Thursday, the two firms announced their collaboration to offer funds that provide access to private markets for retail investors. It came about a month after President Donald Trump signed an executive order that paved the way to increase the availability of alternative assets such as cryptocurrencies and private equity in 401(k)s and other defined-contribution plans. The plans are governed by the Employee Retirement Income Security Act of 1974, or ERISA. Bonnie Treichel, an attorney who specializes in ERISA, expects more firms to seize on private assets as the number of public companies declines and the private market grows. Alternative assets will reach $30 trillion by 2030 , according to Preqin, a provider of private markets data owned by BlackRock. “This combination of market growth and regulatory developments (e.g., the recent Executive Order) is likely to drive further collaboration aimed at developing new products and solutions,” Treichel, founder of Endeavor Retirement, said in an email to CNBC. The Goldman/T. Rowe offerings will include target-date strategies, model portfolios and managed accounts. They intend to launch target-date solutions in mid-2026. Target-date strategies the ‘holy grail’ Target-date strategies are likely the best way for 401(k)s to eventually bring the most participants into alternative assets, Bank of America suggests. Target-date funds automatically reallocate portfolios based on investors’ estimated retirement date and are often the default investment in the plans. “Given that target date strategies are managed by sophisticated investment managers and the hybrid strategies can include a high mix of public assets to provide liquidity, we strongly believe the target date strategy will be the trojan horse for privates to enter the U.S. DC [defined contribution] channel but believe there is a very long timeline,” BofA analyst Craig Siegenthaler wrote in a report last week. Target-date fund assets reached more than $4 trillion in assets last year, a record high, according to Morningstar . However, target-date strategies probably won’t be the first place plan sponsors offer alternatives assets, said Jason Kephart, senior principal for multi-asset strategy ratings at Morningstar. He thinks managed accounts will likely be the first offering, coming out sometime next year, since the participant has to opt-in to do it. That will make plan sponsors more comfortable, he said. “The target date is like the holy grail. That’s what is usually always the default option and that’s what most people are doing — they’re just defaulting in,” he said. “It’s going to be challenging, it’s going to be slow, just given the lack of track records [and] the extra fees.” Fees are almost always higher on private assets, while index-based target-date funds have expense ratios of 0.10% or lower, he noted. Plus, a lot of plan sponsors won’t consider offering investment vehicles to participants until there is a three-year track record, Kephart said. In T. Rowe Price’s case, the firm will probably fund the target-date vehicles to get them up and running, he said. Goldman and T. Rowe intend to launch target-date solutions in mid-2026. “They might have one or two plan sponsors who are already ready to go,” Kephart said. “You’ll probably see some assets start to flow next year, but I don’t think anywhere near where public-only target-date funds are really losing market share.” Kephart doesn’t envision sponsors offering two target-date funds, one just public assets and one that includes alternatives, which means the participant may be automatically defaulted to a fund that has alternatives. “Once you get outside the default option, it’s kind of like a ‘choose your own adventure,’ he said. “I don’t know that a separate target-date fund can appeal as much to people that way.” However, Bank of America sees a second target-date strategy as a potential option — which is why it thinks implementing it will take some time. “We think the target date managers will need to convince the DC plan sponsors to offer a 2nd target date strategy, as replacing the existing default option could encourage too much disruption, at least in the early years,” Siegenthaler said. Plus, participants will have to change their default option or investment allocation to include the public-private strategy, he noted. “These two steps will take years (not months) as both decisions have historically occurred at very low frequencies,” Siegenthaler said. Plan fiduciaries have ultimate say Ultimately the decision to include a target-date fund, or other offerings like managed accounts, that have alternative assets is up to the plan sponsor and other plan fiduciaries, Endeavor Retirement’s Treichel said. Their job is to offer an investment lineup that is in the best interest of the plan and its participants, she said. “That decision carries with it responsibility that must be managed with care,” Treichel said. “Plan fiduciaries will want to understand these options before adding to their retirement plan menu.”
Thursday, February 12
What Goldman’s deal with T. Rowe Price means for private assets in 401(k)s
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