--- title: "Alternatives in 401(k) Plans: Why Private Credit Leads" description: "The case for alternative investments in 401(k) and DC plans: why private credit comes first and how target-date funds and stable value funds can hold it." image: https://content.investmentsandwealth.org/hubfs/IWR-issue4-Article%207%20Expanding%20the%20Toolkit.png --- [Skip to content](https://content.investmentsandwealth.org/publication/alternatives-in-401k-plans-why-private-credit-leads#main-content) [![Investments & Wealth Institute ](https://content.investmentsandwealth.org/hubfs/content-hub/iwi_logo_w294_h46.svg "Investments & Wealth Institute ")](https://investmentsandwealth.org/) Explore - [All Content](https://4812204.hs-sites.com/content-hub) - [Video](https://4812204.hs-sites.com/content-hub?type=Video) - [eBook](https://4812204.hs-sites.com/content-hub?type=eBook) - [Case Study](https://4812204.hs-sites.com/content-hub?type=Case+Study) - [Blog](https://4812204.hs-sites.com/content-hub?type=Blog) - [Podcasts](https://4812204.hs-sites.com/content-hub?type=podcast) - [Webinars](https://4812204.hs-sites.com/content-hub?type=webinar) - [Find An Advisor](https://www.investmenthelp.org/) - [Contact](https://investmentsandwealth.org/contact-us) - [My Dashboard](https://portal.investmentsandwealth.org/s/login/?startURL=%2Fs%2Fhome-page) - Certifications - [CIMA](https://investmentsandwealth.org/certifications/cima-certification) - [CPWA](https://investmentsandwealth.org/certifications/cpwa-certification) - [RMA](https://investmentsandwealth.org/certifications/rma-certification) - [Help Me Choose](https://investmentsandwealth.org/certifications/compare-iwi-certifications) - [Online Education](https://investmentsandwealth.org/online-learning-financial-advisor-ce) - [Conferences & Events](https://investmentsandwealth.org/financial-advisor-conferences-events) - [Experience 2026](https://experience.investmentsandwealth.org) - [Membership](https://investmentsandwealth.org/membership) - [Publications & Resources](https://content.investmentsandwealth.org/) - [Partner Solutions](https://investmentsandwealth.org/partner-and-sponsor) - [About](https://investmentsandwealth.org/about/mission-purpose-value) Investments & Wealth Review - Number 04, 2026 # Expanding the Toolkit The Case for Alternative Investments in DC Plans Stephen L. Nesbitt Large public pension plans often allocate 30 to 40 percent of assets to alternatives. The typical 401(k) participant holds almost nothing but public stocks and bonds. Stephen L. Nesbitt argues the gap has come from operational constraints rather than investment merit, and that evergreen fund structures, regulatory change, and recordkeeper infrastructure now make alternatives workable in defined contribution plans.   His case rests on two principles. Alternatives belong inside professionally managed options (target-date funds, managed accounts, multi-sector fixed income, and enhanced stable value) rather than as standalone menu choices. And private credit, specifically senior-secured direct lending to middle-market companies, should come first, because its income-driven returns, valuation method, and cash flow fit how DC plans operate.   **Key Takeaways** - The Cliffwater Direct Lending Index has returned about 9.5 percent annualized since its 2004 inception, with one negative year (−6.5 percent in 2008). In 2022, when a 60/40 mix fell 15.4 percent, the index returned 6.3 percent. - A diversified private credit portfolio with a roughly three-year average maturity may return more than 40 percent of its loan value in cash each year, which supports the rebalancing managed DC solutions require. - Stable value, with about $900 billion in 401(k) assets, is a practical entry point. Replacing part of its investment-grade bond sleeve with direct lending can raise the crediting rate while keeping the capital-preservation mandate. - Evergreen and interval structures address the daily-valuation barrier by striking daily NAVs under independent oversight. Instant Access ## Read the Full Publication Our Members receive new publications by mail and in the Membership Newsletter. For immediate access—or if you’re not a member—complete the form below. ## About Investments & Wealth Review *Investments & Wealth Review* is a bimonthly magazine, written by award-winning authors from academic institutions and leading financial firms. Immerse yourself in current industry news and thought-provoking articles on the investment, legal, regulatory, business development, retirement, and wealth management topics that matter most to you and your clients. 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Nesbitt", "url" : "https://content.investmentsandwealth.org/publication/author/stephen-l-nesbitt" }, "dateModified" : "2026-10-16T13:34:10.119Z", "datePublished" : "2026-10-16T13:25:45.000Z", "headline" : "Alternatives in 401(k) Plans: Why Private Credit Leads ", "image" : [ "https://content.investmentsandwealth.org/hubfs/IWR-issue4-Article%207%20Expanding%20the%20Toolkit.png" ], "mainEntityOfPage" : { "@id" : "https://content.investmentsandwealth.org/publication/alternatives-in-401k-plans-why-private-credit-leads", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://content.investmentsandwealth.org/hubfs/IWI%20Logos/IWI%20Logo%20Horizontal/180227_4C_LOGO_Horizontal.png" }, "name" : "Investments & Wealth Institute" } } ```