Alternative assets in DC plans: ahead of the curve
The White House just endorsed including alternative assets in retirement plans, but long ago TIAA adopted an alts strategy to enhance returns and payouts.
Time to read: 6 minutes
Key takeaways
- The industry is buzzing about adding alternative assets to retirement plans, but it’s not the new phenomena some make it out to be. Some plans, including ones working with TIAA, have been ahead of the curve.
- Employers and consultants will need to consider fees, transparency, and liquidity when evaluating new products that include alternative investments.
- Why this matters: TIAA’s guaranteed income products already incorporate returns from alternative investments by way of our General Account, which has invested in alts for years.
ALL ANYONE COULD cluck about in early 2025 was the soaring price of eggs. Diners slapped surcharges on omelets. Grocery stores limited purchases. Bakers traded secrets for egg substitutes online. A devastating outbreak of bird flu had made fresh eggs hard to come by, and American consumers were paying the price.1
For Marc deBree, TIAA General Account’s head of real estate and alternatives, the news provided a real-time look at how alternative assets can help diversify investment portfolios. That’s because a private equity fund owned by the General Account invested in an innovative egg business. At a time of extreme price volatility, restaurants and bakeries increasingly looked to the company’s roster of dried, liquefied, and precooked products to use in egg bites, sandwiches, and chef salads.
When a hard-to-access corner of the commodity markets zigged, TIAA’s private equity investment zagged, insulating it from market turbulence. It’s a single but representative example of how thousands of different global alternative investments interact inside the TIAA General Account, or GA.
A general account is the pool of money an insurance company invests across asset classes. The income generated is used for annuity payments and expenses.
Alternative assets, or alts, can be riskier than publicly traded stocks and bonds, but have the potential to deliver higher and less-correlated returns. The GA is purpose-built to invest and generate the income that funds TIAA’s guaranteed income products. Since the GA has—by far—the largest alts book of any insurer,2 their investment returns are baked into the interest rates we offer to savers and the annuity payouts we make to retirees.
“Our alts investments cut through many layers of the global economy,” deBree says. “There’s always something relevant happening with an existing investment, a new investment we’re considering, or a strategic consideration we’re monitoring.”
TIAA General Account alternative asset allocation
The TIAA General Account has 17% of its assets in alternative investments like real estate and private equity, plus another 3% in private credit—an area generating a lot of interest these days. The remaining 80% is invested in high-quality fixed income.
- High-yield private credit: 3%
- Real assets: 3%
- Real estate: 4%
- Private equity: 4%
- Other investments: 6%
Source: TIAA, as of June 30, 2025
Alternative assets and retirement plans
Alts can enhance portfolio diversification, reduce volatility, and have the potential to bolster returns—but currently they have almost no representation on defined contribution (DC) plan menus. That’s likely to change soon: A more favorable regulatory environment seems likely given a recent presidential
Evaluating these new products and their role on an investment menu won’t be easy; alternative assets are not a monolithic group. The umbrella term “alts” covers real estate, commodities, hedge funds, private equity, venture capital, infrastructure, direct-to-business lending known as private credit, and more. Most alts are accessible only through private marketplaces that require specialized, institutional access to buy or sell.
That puts many investors at a disadvantage, advocates point out. For instance: Nearly nine out of 10 large companies in the United States are private, so tens of millions of ordinary investors with retirement plans are effectively locked out from investing in them.4
Our alts investments cut through many layers of the global economy.
Outside the DC market, demand for private assets is booming. Almost 92% of institutional investors who hold alternatives own both private equity and private credit investments, up from 45% in 2021, according to a 2025 survey conducted by Nuveen, TIAA’s wholly owned asset manager.5
Defined benefit (DB) plans have long allocated big slugs to private equity, private credit, and hedge funds to support their liability-driven investment strategies. Because DB plans aren’t subject to unanticipated withdrawal activity (versus DC plans, from which people can withdraw their money virtually any time, for any reason), they can more freely invest in illiquid assets that have the potential to earn higher returns.
Standalone private equity strategies for the DC market haven’t gained traction. Recently, numerous asset managers have announced plans to embed private equity and private credit into new target date funds (TDFs) that can serve as DC plans’ qualified default investments. A few target date managers (including TIAA, through Nuveen) did this nearly a decade ago with direct, or private, real estate—investments in properties themselves, instead of publicly traded shares of real estate companies or real estate investment trusts.6
Barriers to adopting alts in DC plans
Embedding private assets in target date portfolios would mark a tipping point in how Americans access these potentially higher-returning—but inherently pricier and more complex—investments.
Traditional alts strategies, many of which require multiyear capital commitments, can charge between 1% and 2% of assets—plus an additional 10% to 20% fee on profits.7 More-liquid interval funds, which offer quarterly or semiannual withdrawals, can still charge up to 1.5% of assets annually, plus an additional portion of profits.
Whether asset managers can strike the right balance with fees, transparency, and liquidity for DC participants is a major fiduciary question for employers and consultants, according to Jason Kephart, head of multi-asset strategy ratings for investment research firm Morningstar. He said that how fees are set, disclosed, and communicated to DC plan participants—especially new products with no track records—will be prime concerns for plan sponsors keen to avoid lawsuits over plan expenses. Two-thirds of asset managers surveyed by Cerulli Associates said “litigation risk” poses a serious challenge to distributing alts through DC plans.8
I don’t expect sponsors will be chomping at the bit to replace tried-and-true, low-cost defaults that have historically performed really well.
“There's so much fear over fee litigation that for a sponsor to say, ‘we’re going to increase fees,’ just seems like a hard conversation,” Kephart says. “And not only would fees be higher, they wouldn’t be as transparent or straightforward. That’s why I don’t expect sponsors will be chomping at the bit to replace tried-and-true, low-cost defaults that have historically performed really well.”
How big of an allocation to alts should sponsors expect to see in these new target date strategies? Under the Investment Company Act of 1940, the Securities and Exchange Commission’s fund manager rule book, open-ended funds must limit holdings of illiquid investments to 15%. Collective investment trusts (CITs) and managed accounts aren’t subject to the SEC limit, although Morningstar’s Kephart says 15% is becoming ingrained as an average allocation for alts across all types of strategies coming to the DC marketplace.
Like what you're reading?
Get more retirement plan insights delivered to your inbox.
TIAA’s alternative investments expertise
TIAA clients might be surprised to know alts investing has long been part of their plan’s investment menu through the GA’s portfolio,
One reason many asset managers fail with alts, or can’t meaningfully pursue them in the first place, is they’re not able to tolerate losses in relatively illiquid assets. But the long-term nature of the GA’s liabilities—payouts to annuitants over decades—means TIAA doesn’t face those liquidity risks. And the sheer scale of TIAA’s GA—it invests $25 billion to $30 billion annually, equivalent to two or three large corporate DB plans combined—means it can access investment opportunities most investors can’t.11 The GA can do all this and keep TIAA’s highest-possible credit ratings because of its financial strength.12
The long-term nature of annuities works hand-in-hand with our long-term investment style.
“The long-term nature of annuities works hand-in-hand with our long-term investment style,” deBree says. “Our ability to be patient gives us flexibility to maneuver through market cycles and be opportunistic buyers when others are under pressure to sell.”
TIAA has deep capabilities and expertise in originating and structuring alts investments on a global scale thanks to Nuveen. For instance, through Nuveen, the GA has gradually increased holdings of non-investment-grade infrastructure debt. Lending such as that fills the funding gap for energy infrastructure that can power the growth of artificial intelligence.
“A wide spectrum of capital-intensive solutions is needed to meet the power demands of decarbonization and digitalization,” says Don Dimitrievich, head of Nuveen’s energy infrastructure credit team. “Infrastructure private credit as an asset class is in its infancy and poised for significant growth.”
Seeking regulatory guidance for alts in DC plans
No specific rule prevents plan sponsors from adding alts to DC plans, though signals from regulators have been mixed in recent years and lawsuits have asserted violations by DC plan fiduciaries that have introduced alts. Under President Donald Trump in 2020, the Department of Labor (DOL) issued favorable guidance on the topic of fiduciary liability and including private equity inside asset allocation funds. A year later, the DOL under President Joe Biden was more cautious, emphasizing it didn’t endorse private equity inside 401(k) plans.
Additional support arrived in August 2025 with a White House executive order, which stated “every American preparing for retirement should have access to funds that include alternative assets” when a fiduciary determines plan participants benefit. President Trump’s order defined alts to include private equity and credit, real estate, commodities, lifetime income investment strategies, and even “digital assets,” such as cryptocurrencies.
Much still needs to be settled, and there’s no telling how long before plan sponsors—few of whom have offered alts so far—prioritize changes to DC plan investment lineups. Among other things, the executive order directs the DOL to reexamine its guidance on fiduciary duties, and to clarify its position on the appropriate fiduciary process associated with offering alts in asset allocation funds, such as TDFs. New guidance and regulations are expected to follow.
Expect more high-profile stakeholders to weigh in. Even before the executive order, Sen. Elizabeth Warren, the ranking member of the Senate Banking, Housing, and Urban Affairs Committee, voiced concerns after one DC recordkeeper announced plans to add alts.
We’re here to help
Contact
Have questions or need help? Get in touch.
Sign up
Join our newsletter and get our latest thinking.
Webinars
Watch our webinars on all things retirement.
1 In February 2025, the New York wholesale egg price peaked at $8.53 per dozen, a record, according to the U.S. Department of Agriculture.
2 As of December 31, 2023, according to a J.P. Morgan peer analysis of Life Insurers’ Asset Allocations. TIAA’s “Schedule BA Assets and Real Estate” totaled $46.8 billion, compared with $30.1 billion for the next-largest peer.
3 Americans held $12.2 trillion in all employer-based defined-contribution retirement plans on March 31, 2025, of which $8.7 trillion was held in 401(k) plans, according to the Investment Company Institute as of June 18, 2025.
4 According to Torsten Sløk, Apollo Global Management’s global economist, and S&P Capital IQ, 87% of U.S. firms with revenue greater than $100 million are privately held, as of April 20, 2024.
5 Nuveen EQuilibrium Global Institutional Investor Survey, March 18, 2025.
6 The Nuveen Lifecycle Target Date Series (formerly the TIAA-CREF Lifecycle Fund Series) first included direct real estate investments in 2017. See press release titled: “Nuveen enhances target-date fund offering with direct real estate allocation,” April 20, 2017.
7 CAPTRUST, “An Alternative Investment Realm,” VESTED Magazine, August 7, 2024.
8 Cerulli Associates, “U.S. Defined Contribution Distribution 2024: Addressing the Obstacles to Inclusion of Alternatives in DC Plans." October 14, 2024.
9 Annuity contracts may contain terms for keeping them in force. We can provide you with costs and complete details.
TIAA Traditional is a fixed annuity issued by Teachers Insurance and Annuity Association of America (TIAA), 730 Third Avenue, New York, NY, 10017: Form series including but not limited to: 1000.24; G-1000.4; IGRS-01-84-ACC; IGRSP-01-84-ACC; 6008.8. Not all contracts are available in all states or currently issued.
10 As of June 30, 2025.
11 Zorast Wadia, Alan Perry and Ryan Cook, “2025 Corporate Pension Funding Study.” Milliman, April 30, 2025. The average total market value of the 100 U.S. public companies with the largest defined benefit plans was $12.6 billion, as of December 31, 2024.
12 For stability, claims-paying ability and overall financial strength, Teachers Insurance and Annuity Association of America (TIAA) is one of only three insurance groups in the United States to currently hold the highest possible rating from all four leading insurance company rating agencies: A.M. Best (A++ rating affirmed as of July 23, 2025), Fitch (AAA rating affirmed as of August 5, 2025), Standard & Poor's (AA+ rating affirmed as of May 29, 2024) and Moody’s Investors Service (Aa1 rating affirmed as of May 21, 2025). There is no guarantee that current ratings will be maintained. The financial strength ratings represent a company’s ability to meet policyholders’ obligations and do not apply to variable annuities or any other product or service not fully backed by TIAA’s claims-paying ability. The ratings also do not apply to the safety or the performance of the variable accounts, which will fluctuate in value.
TIAA's capital base is the largest among all insurers. As of December 31, 2023, according to a J.P. Morgan peer analysis of Life Insurers’ Asset Allocations. TIAA’s capital and surplus totaled $48.9 billion, compared with $38.2 billion for the next-largest peer.
The views expressed in this material may change in response to changing economic and market conditions. Past performance is not indicative of future returns.
The TIAA General Account is solely owned by TIAA and supports TIAA’s contractual guarantees and business operations; its performance is not directly allocated to any specific contract or obligation.The TIAA General Account backs TIAA’s fixed annuities, including but not limited to TIAA Traditional. The TIAA General Account is an insurance company account and is not available to investors as an investment. All guarantees are subject to TIAA's claims-paying ability.
Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the potential use of leverage, potential short sales and concentrated investments and may involve complex tax structures and investment strategies. The real estate industry is subject to various risks including fluctuations in underlying property values, expenses and income, and potential environmental liabilities. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits.
This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.