Constitution Capital's Horizon CIT puts daily-priced PE inside Principal plans

Constitution Capital Partners has launched a collective investment trust that puts private equity inside defined contribution plans, built to be carried by Principal Financial Group's recordkeeping platform; it opened with more than $50 million from 18 retirement plans and near-term commitments the firm says will push assets past $1 billion, PLANADVISER reported.

The trust runs a multi-manager approach spanning primary fund commitments and direct equity co-investments, with a liquidity sleeve designed to support participant transactions and plan cash flows, so the structure can slide into target-date funds, managed accounts, and other multi-manager offerings and a plan sponsor never has to put private equity on a menu. SEI Trust Co., a subsidiary of SEI Investments Co., is trustee.

Constitution Capital's framing is the useful part: "Access is important, but what's really more important is that exposure be diversified across private equity managers, sectors and vintages rather than concentrated in any particular single fund or investment," CEO Dan Cahill said. "We designed our Horizon fund specifically for daily pricing, liquidity and operational needs for the defined contribution market." That is a description of the product as a sleeve, not a standalone allocation.

Principal's half of the announcement is distribution plus a broadening menu. On Aug. 26, the recordkeeper expanded its Featured Partner program into private markets, adding AllianceBernstein, Apollo, Ares, Blackstone, Blue Owl, Carlyle, Goldman Sachs Asset Management and KKR to a roster that had included the public-market strategies of PGIM, Franklin Templeton and Principal Asset Management; Brett Fisher, assistant vice president of investment product strategy at Principal, said the program had run for nearly three years before the expansion, and Horizon is available at launch to eligible defined contribution plans on Principal's 401(k) platform.

The Horizon CIT drops into the benchmark vacuum this publication has tracked, and it does not wait for the Labor Department to fill it: the DOL's safe harbor for private assets in DC plans remains stalled for want of a meaningful benchmark. Principal has not waited either, as it has been wrapping private markets in managed CITs and attaching its own oversight to target-date vehicles; this launch goes further, pricing daily and holding a liquidity sleeve in a market that has yet to agree on an index.

The vehicle math is on their side, because collective investment trusts now hold 55 percent of the $5.3 trillion target-date market, and private markets are the next allocation fight; what the Horizon launch adds is a sponsor-controlled vehicle at the center of that fight.

The $1 billion near-term commitment figure is the number worth watching: a $50 million launch from 18 plans is a pilot, and $1 billion is a product. The multi-manager construction across managers, sectors and vintages is the right template for daily-priced private equity, but the liquidity sleeve is the part that has to work, because if a wave of participant outflows hits, the sleeve stands between redemptions and the underlying fund commitments and the daily price the trust posts will be tested by the very flows the product invites.

The launch also marks a shift in who is building the vehicles. A week earlier, four private-credit managers — Ares, Shenkman, StepStone and Jana — filed their own DC-bound funds, a move from recordkeeper CITs to fund sponsors' own shelves; Constitution Capital is the private-equity version of that move, a sponsor-controlled trust wired into a recordkeeper's platform.

Recordkeepers control the menu and asset managers control the construction, a split the Horizon launch makes explicit. Constitution Capital's choice to run multi-manager and vintage-diversified is the structure best positioned to survive the fiduciary scrutiny daily pricing invites; the trust is available on Principal's platform now, and the near-term commitments are the first number that matters, but the liquidity sleeve will decide whether that number holds.