PLANSPONSOR - August - September 2022 - 11

providers, Venter says, fees have decreased.
" The biggest concern is the fee
impact because we've been in a market
environment where
fees
compressed
significantly, in the post-'great financial
crisis' cycle, and stocks and bonds
performed stronger than anyone
expected, " Venter says. " That era of postgreat
financial crisis growth is over, and
you're looking at solutions that offer the
potential for growth in a portfolio. But you
have to decide how active and how passive
will your solution be to balance out the
impact of fees. "
Perkins concurs about fees-
liquidity, too-being inhibitors, " because
of the sheer number of boots on the ground
needed to run an effective and highperforming
private real estate offering, ...
which then comes with a higher fee for the
investment offering itself. "
Venter urges plan sponsors
interested
in private real estate to find the right
fee figure, as the headline cost of the asset
class can be misleading. She says sponsors
should incorporate the cost of the
investment with the total return, net of
fees, to obtain a clear picture of the value,
then present that to the participants.
" The way you get them comfortable
is you expand the conversation to
[clarify] where the money's coming from, "
she says. " 'What is your access budget?'
Once that conversation is undertaken, it's
possible for plans to move forward and
understand that fee concerns are relevant,
this makes sense, and any litigation that's
coming out of that is noneventful. "
Plan Sponsors' Path
Sponsors may be looking afresh at alternatives
and private real estate to help boost
participants' returns. With the last decade's
bull equity market and relatively low volatility,
" it's been pretty easy for people to
save for retirement, " Perkins says.
But " it looks a little bumpier [now
in the market], so just highlighting the
importance of diversification and lower
risk strategy is pretty compelling. " She
cites these as reasons " for professional
TIDBITS
Annuities on a Roll
Q2 broke a record for annuity sales, which rose 22% to
$77.5 billion. This topped the products' last best quarter-
Q4 2008, in the Great Recession-by $9 billion. Sales
have shot up 76% since Q2 last year.
Source: LIMRA, U.S. Individual Annuity Sales Survey (preliminary findings)
#1 Obstacle to Retirement?
When it comes to saving for a comfortable retirement,
inflation tops the " obstacles " list this year, in a study of
1,000 plan participants, ages 21 through 70.
Inflation
Monthly expenses
Stock market volatility
Unexpected expenses
Credit card debt
Children's education
35%
33%
33%
24%
21%
Charles Schwab, " 2022 401(k) Participant Study "
multi-asset solutions providers ... to incorporate
private real estate and alts. "
To protect participants' retirement
assets and help to improve their retirement
readiness, employers may want to
investigate the history of defined benefit
plans and borrow from the pension
management playbook, Perkins says.
" The institutionalization of real estate as
an asset class in the late 1970s and early
'80s really came about as defined benefit
plans, at that time, were looking for an
inflation hedge, " she explains.
Sponsors may also be enticed by
the investment's increased risk-adjusted
returns, " particularly of importance in
today's environment, " she adds.
DC plan sponsors have traveled a
winding road since the 1970s-and, when
it comes to alternatives and private real
estate, she says, that road might lead back
to the beginning.
" With private real estate having
served the defined benefit community [as]
an inflation hedge, which kick-started the
asset class from an institutionalization
standpoint, [it] feels a little bit like déjà vu
now in terms of people trying to figure
out how they'll protect their retirement
investment, " Perkins says. -Noah Zuss
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