Study Concludes Lack of Asset Diversification in Defined Contribution Retirement Plans Has Been $5 Billion Annual Missed Opportunity

Lauren Mullins, Senior Director of Communications

Research from the Georgetown University Center for Retirement Initiatives finds allocation to both private equity and real assets would result in an additional $2,400 per year in spending power for a retiree with $48,000 per year in retirement income.

(Washington, D.C., July 13, 2023) A new report from Georgetown University’s Center for Retirement Initiatives (CRI) and CEM Benchmarking (CEM) finds that adding illiquid assets, such as private equity, real estate, and infrastructure, to the target date funds (TDFs) of defined contribution (DC) retirement plans would have resulted in a 0.15% (15 basis points) increase in return per year over a decade. When applied to all U.S. target date options, such an increase would currently represent $5 billion in additional annual net returns.

In the study, Has the Lack of Asset Diversification in DC Retirement Plans Been a Costly Missed Opportunity?, CEM modeled three DC investment scenarios: adding allocations of private equity, allocations of real assets (real estate and infrastructure), and smaller allocations of both, all substituted for traditional stocks and bonds. The analysis found that the allocation of a mixture of both private equity and real assets resulted in the highest percentage of improved outcomes: 82% over the 10-year period. For an individual participating in a DC plan, this improved return on investment, if obtained over their career, would result in an additional $2,400 per year in spending power for a retiree with $48,000 per year in retirement income.

As U.S. and global retirement markets transition from defined benefit (DB) style plans to defined contribution (DC) plans, retirement savings options have evolved significantly, with TDFs taking in a large part of new contributions. Most TDFs do not currently contain private assets such as private equity or real estate, while DB plans have been increasing their allocations to these asset classes.

“This research demonstrates why it is increasingly important for plan sponsors to diversify and optimize the asset allocation of their target date funds,” said Georgetown Research Professor and CRI Executive Director Angela Antonelli. “The income benefits to retirees can be significant, and operational issues can be easily addressed.”

These findings also suggest the mix of private equity and real assets allows the performance of one asset to potentially offset a weaker performance of another asset in any given time period, contributing to better outcomes for retirees.

“The early adopters in this space have typically been plan sponsors who have experience in allocating to private assets in their defined benefit plans,” said Chris Flynn, CFA, head of Product Development at CEM. “The biggest opportunity is for large providers of target date options to use their scale to offer compelling investment options that access private markets as efficiently as possible.”

According to Kevin Vandolder, CFA, leader of the U.S. East for CEM, “Providers can do this working alongside innovative private market investment managers in delivering strong financial outcomes for participant-directed plans.”

Interviews with study authors and contributors are available and can be arranged by contacting Lauren Mullins.

About the Georgetown University Center for Retirement Initiatives

The Center for Retirement Initiatives is a research center of the McCourt School of Public Policy at Georgetown University, one of the top-ranked public policy programs in the nation. Through its academic reputation and ability to engage with policymakers, business leaders, and other stakeholders, the McCourt School attracts world-class scholars and students who have become leaders in the public, private, and nonprofit sectors. The CRI is dedicated to strengthening retirement security by expanding access and coverage for the private sector workforce; providing thought leadership and developing innovative new approaches to retirement savings, investment, and lifetime income; and serving as a trusted policy advisor to federal, state, and local policymakers and stakeholders.

The CRI makes its research reports publicly available on its website at For additional information or media requests related to this report or the Center’s work, contact Lauren Mullins at 202-550-5999 or