DC plan sponsors eye allocation to private credit

Defined contribution (DC) plan sponsors are interested in adding private credit in asset allocation solutions, according to a new survey.

The 20th Annual Defined Contribution (DC) Consulting Study conducted by Pimco found that about half of institutional consultants and 91 per cent of aggregators ranked private credit among the most likely private assets to be added in the near term, as DC plan sponsors seek broader access to fixed income markets.

The study, which captured data from 36 consulting and advisory firms who serve more than 53,000 clients with aggregate DC assets in excess of $10.2tn (£7.6tn), also reported a growing interest in private markets exposure.

Nearly 80 per cent of consultants and advisors expect plan sponsors to move toward blended target-date funds as the new default strategy, with their ability to combine active and passive management.

The findings revealed that all of the aggregator firms surveyed expect at least some plan sponsors to introduce private market exposure within target-date funds or managed accounts over the next 12 months, up from 37 per cent in last year’s study, while 57 per cent of institutional consultants reported similar expectations.

As adoption expands, consultants and advisors emphasise balancing return potential with asset quality, cost, and maintaining adequate liquidity to meet DC daily needs, Pimco said.

“Fixed income markets have changed significantly over the last decade, but most DC plan menus still reflect a narrower, legacy opportunity set,” said Rene Martel, managing director and Pimco’s head of retirement. “What we’re seeing in this study is a clear shift: consultants and plan sponsors recognise that participants need access to a broader range of fixed income solutions in order to better navigate today’s market environment and improve long-term retirement outcomes.”