Alternative investments are gaining some traction within defined contribution plans, a trend that is expected to continue for the next several years.
That's according to a report by Hewitt EnnisKnupp, an Aon company. Alternatives work well within 401(k) plans as long as they are included in multi-asset funds, such as target-date funds and diversified core options, which reduces the potential for misuse by plan participants, the report's authors found.
Hewitt warned that even though the number of alternative options is increasing in the DC space, "investors must still critically evaluate options — a specific fund may be appealing for institutional investors but this doesn't always imply that the strategy can be modified in a way that makes it equally attractive for defined contribution plans."
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