AllianceBernstein, Brookfield, Carlyle Latest Alts Managers to Partner on Private Fund for 401(k)s

Private property. C’mon in.

AllianceBernstein, Brookfield Asset Management and Carlyle Group are partnering to launch a private markets fund for 401(k)s and other defined contribution retirement plans. The product, ABC [ONE], is designed to sit alongside existing target-date funds or managed accounts and give investors exposure to private equity, private credit and real estate. AllianceBernstein will oversee the private credit sleeve and determine allocations based on participants’ ages and risk profiles, per a release. Brookfield will manage the real estate investments, and Carlyle will handle private equity.

It’s the latest development in Wall Street’s growing push to bring private markets into retirement plans, a movement backed by asset managers, record keepers and even some politicians in Washington. However, financial advisors see the trend as a mixed bag that might become complicated and risky for clients. “The more investment choices that a 401(k) offers, the lower the participation rate,” said Stacy Francis, CEO of Francis Financial. 

Who Wants In on This?

Private markets have long been limited to institutional and accredited investors, but that’s changing and fast. Executive actions from President Donald Trump aimed at expanding access, combined with a wave of partnerships, have fueled expectations that alternatives will become a larger part of retirement investing:

• Allocations to private investments in DC plans could reach $1 trillion by 2030, accounting for just over 6% of all assets in the plans, according to a new study from Deloitte.
• Private equity is expected to account for the largest share of the allocations at 43%, then real estate at 28%, private credit at 20% and infrastructure at 9%.

“With the public markets reaching all-time highs on nearly a daily basis, it makes sense to add investments with lower correlation to the public equity markets,” said Tom Balcom, founder of 1650 Wealth Management.

Democratization. It’s not like the average Joe or Josephine hasn’t been exposed to private markets inside pension funds. However, those are pools managed by professionals, whereas 401(k)s are designed for individuals who can pick and choose their own strategies. 

“Not everyone’s an investment professional, so there’s certainly a risk of misallocating,” said Sean McCaffery, a senior DC plan analyst at Fiducient Advisors, adding that managed accounts and target-date funds probably make the most sense because they limit liquidity risks. “It’s difficult for a participant to truly understand the complexities of alternatives.”