John Hancock latest to support use of Liquid Alternatives in 401(k) Plans

John Hancock latest to support use of Liquid Alternatives in 401(k) Plans

Hardly a week goes by without a retirement services firm issuing a report on why retirement plans should adopt liquid alternatives for use in 401(k) plans.  We’ve covered many in this blog over the past several months.  With a report by Leo Zerilli, CIMA, head of investments, John Hancock becomes the latest to suggest that DC plans should incorporate liquid alternative investments into professionally-managed asset allocation options.

Interestingly enough, Mr Zerilli cites the NACUBO studies that show the average university allocation to alternative investments to be 53% of their portfolios (preliminary 2014 data suggests that endowments have increased this allocation to 58%).  Mr. Zerilli mentions that not all alternatives rely on the illiquidity premium to drive returns.  We know that through our research of the Endowment Index^TM, which in our research has shown the ability to mirror returns of the average endowment fund, without illiquid investments.

Mr. Zerilli cites a DOL acknowledgement that higher expenses (of alternatives) “may be for….access to special investments that can smooth returns in uncertain markets, and may be worth it…”

Mr Zerilli discusses how to incorporate alternatives into a plan, and suggest that stand-alone alts are most prudently added to a plan through multi-alternative strategies that blend traditional and alternative investments together.

You can read the entire report, titled Deepening Diversification in Defined Contribution Plans: The Rise of Liquid Alternatives by clicking on the link.

For advisors and plan sponsors that agree with Mr. Zerilli’s assessment and are seeking to add a multi-asset investment option that includes alternatives might wish to consider the Endowment Multi-Asset ETF Allocation.