Pittsburgh Post-Gazette Len Boselovic’s Heard off the Street column
Hedge and private equity funds and other alternative investments have yet to claim much turf in the growing market, but that could change.
Shifting responsibility for retirement saving from employers to employees means fewer employers are offering pension plans. Some are getting out of the pension business by offering lump sum payments to workers and retirees or are purchasing annuities that turn their pension liabilities over to insurance companies. Other companies have frozen benefits and are offering 401(k) plans to employees.
With their biggest market in decline, purveyors of hedge funds and other alternative investments are venturing into the more promising side of retirement saving.
"It's just a growing asset. Money keeps pouring in every paycheck,"
"I think it's better to have the basic asset classes covered," he said.
However, adding new options such as alternative investments is one of nine hot trends among 401(k) plan sponsors, according to one benefits consultant.
"Consideration is being given to weightings toward alternatives, such as direct real estate, commodities, hedge funds and private equity,"
Proponents say alternative investments offer retirement savers the same benefits they provide to pension funds: greater diversification and the opportunity to hedge risk.
"You can create better returns with lower levels of risk," said
Target date funds are designed for workers who expect to retire near a given year. The funds shift their portfolios from riskier investments the further a person is away from retiring to more conservative ones as they approach retirement.
Using alternative investments as part of a professionally managed target date fund gives investors exposure to asset classes that can hedge risk and provide returns that are not tied to how the stock and bond markets perform, said Cammack vice president
"There's definitely demand and there's definitely interest," she said. "I'm not sure everyone has figured out the best way to do this."
Benefit consultant
Offering the investments as part of a professionally managed, one-fund solution will allay concerns about unsophisticated 401(k) participants dabbling in investments that can give professionals fits. Calpers, a
Imagine how complex they will be for 401(k) investors who, according to investment firm
___
(c)2015 the Pittsburgh Post-Gazette
Visit the Pittsburgh Post-Gazette at www.post-gazette.com
Distributed by Tribune Content Agency, LLC
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News