In a white paper prepared by BNY Mellon, retirement head Rob Capone suggests that returns in DC plans lag DB plans because of limited diversity and too high a percentage of assets in equities. The white paper suggests that the right combination of real estate, emerging market debt and liquid alternatives could improve returns in DC plans and reduce volatility, while protecting against inflation as well.
In particular, many plans have emerging market debt. However, when combined with fixed income, it would reduce volatility, while real estate combined with TIPs and commodities provide inflation protection. Since liquid alternatives have a low correlation to equities, they provide a good hedge.
