Episode summary
Episode 29: Expanding DC Plans: The Role of Private Markets with Guest Pat Arey, Empower
Alternative Allocations
· · Hosts: Tony Davidow · Guests: Pat Arey
Summary
Pat Arey of Empower argued that private markets are moving from a long-delayed idea in defined contribution plans to a more practical tool for retirement outcomes, but only when delivered through professionally managed solutions. He said Empower oversees about 1.7 trillion assets and 19 million plus working Americans, and that its custom solutions and advice platform are central to how private markets are being introduced.
The discussion traced why DC plans lagged DB plans: DC is newer, participants historically faced sprawling fund menus, and the Pension Protection Act of 2006, the rise of independent fiduciaries, and recent Washington guidance helped create the structure needed for broader alternatives access. Pat said illiquidity is a feature, not a flaw, because it can support long-run returns, but he stressed that education and fiduciary oversight are essential.
A major theme was structure. Pat said Empower gravitated toward collective investment trusts because they can support qualified investor requirements and daily liquidity in a plan environment, while fitting private market exposure inside advice-based or advisor-managed accounts. He said advisers are pivotal because many already use private markets in wealth channels, and Empower’s survey found 58% would be comfortable recommending them to retirement plans, rising to 75% for advisers who also work with pensions. Pat expects adoption to build gradually, with many current products using about 10% to 15% private market allocations.
Key takeaways
- Pat Arey said Empower sees private markets as best delivered inside professionally managed and advice-based DC solutions, not as standalone menu options.
- Arey said the DC market has lagged DB plans because it is newer, more regulated, and requires more education around illiquid investments.
- He said collective investment trusts can help solve both qualified-investor and liquidity challenges for DC private market offerings.
- Empower’s survey found 58% of advisers would be comfortable recommending private markets to retirement plans, and 75% among advisers who also work with pensions.
- Arey said current private market allocations in these products are often around 10% to 15%, with adoption likely to grow gradually over time.
Notable quotes
“we're at a really exciting point where these private market strategies are becoming far more accessible through partners like empower who really embrace this”
“these are by and large illquid investments. That's just a feature, not necessarily inherent good or bad”
“the CIT is really filling that role. Two, liquidity. So when we talk about private markets and to your point, these are illquid or semi-liquid structures”
“68% of the adviserss that we work with today are using private market strategies predominantly in the wealth space”
“Generally, what we're seeing in some of these products that are going live or both in use on our platform or other places is somewhere in that 10 to 15% range”
How the episode opens
This is Alternative Allocations by Franklin Templeton, a monthly podcast where we share practical, relatable advice and discuss new investment ideas with leaders in the field. Please subscribe on Apple, Spotify, or wherever you get your podcast to make sure you don't miss an episode. Here is your host, Tony Davidau.
Welcome to the latest episode of the Alternative Allocations podcast series. I'm thrilled to be joined today by Pat Arie of Empower. Pat, you guys are making a lot of headlines really changing the way that people think about allocating to private markets in DC plans.
Thanks for joining us.
No, thank you very much. We're very excited to be here. It's been a really exciting last couple of years in the industry and seeing this really kind of grow and come to fruition and particularly a lot of what's been going on more recently, particularly out of Washington and some of the other innovation that we're seeing from the partners that we're working for on our platform.
Very exciting. Maybe we'll start with the basics though. Talk a little bit about Empower and your role in Empower and then maybe we'll get into more of the specifics about how you're starting to introduce this.
Absolutely. Empower is an industry leader in the retirement plan space. We're really focused on and known for innovation, working very closely with our customers, clients, as well as our culture.
That is to the tune of about 1.7 trillion assets on the platform and 19 million plus working Americans. My role at empower, I'm part of the custom solutions team. So I get to play a great role part of the distribution team and working with a lot of our intermediary or advisorbased community in some of these custom products that we're offering to the marketplace and particularly advice.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- dc plans
- private markets
- retirement outcomes
- advisors role
- private market investments
Companies and tickers mentioned
- EP
- STT
- BEN
- Empower
- State Street Global Advisors
- Fidelity
- Franklin Templeton
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Alternative Allocations, this episode and its artwork belong to Franklin Templeton. Octagon is not affiliated with the show; this page is an independent summary.
