Article Originally Published: Advisor Perspectives
The battle of words between the alternative investments industry and all others about whether alts belong in 401(k)s is far too familiar today. The two sides speak different languages. They don’t engage each other.
The industry speaks of “better returns,” “choice,” and “diversification.” The recently signed “Democratizing Access to Alternative Assets for 401(k) Investors executive order urges alts with the rationale, “democratizing access.” Meanwhile, just about everyone else speaks of why alts should be avoided: high costs, illiquidity, opaqueness, complexities, and risks. No wonder fiduciary advisors generally steer clear of them.
There is no public discussion between Wall Street’s alts industry and advocates for retirement savers; that is, no discussion where each side can challenge the other on specific points. There is no attempt by the Wall Street alts industry to explain the negatives of alts — especially the challenge of selling illiquid holdings that are valued by the manager rather than the market.
This silence is deafening. What we hear instead are terms like “choice” or “new opportunity” or “democratization” without explanation or context. These mere utterances are designed to sell — not to inform or enlighten.
