Partners Group director says private assets belong inside the QDIA

Anne Lester, a Partners Group board member, told the PLANADVISER 360 conference on Monday that private equity, private credit and newer income streams such as royalties belong inside a plan's default investment.

Speaking in Orlando in a session called "Bringing Private Markets into 401(k) Plans," Lester said private markets are not new to defined contribution plans, and plan advisers have become more comfortable with them. She named private equity and private credit as the two asset types most often featured in plans today, with private infrastructure and private real estate also available. Royalties, a category Partners Group has built from music catalogs and pharmaceutical income, are the newest she described. "These income streams tend to be more inflation-sensitive, very predictable," she said.

The test for sponsors is how the exposure works inside the plan structure, Lester said. "This belongs inside a [QDIA]," she said, pointing to target-date funds and managed accounts as the most practical vehicles. That moves diligence onto the target-date or managed-account manager. In a lineup review, sponsors should ask how much of the portfolio is in the private sleeve, how those holdings are valued between transactions and how much stays liquid against withdrawals. Liquidity is generally handled at the fund level because private assets are only part of a mostly liquid portfolio.