Participants would pay more for target-date funds holding private markets

What's New

`Most defined contribution participants would accept a higher fee for a target-date fund that holds private markets, according to Invesco's Summer 2026 DC Participant Pulse Survey. The survey offered a fund series with a modest private allocation at an added annual cost of 0.15%. Of those surveyed, 65% said yes. Another 10% said it depends. Access did little to win them over. Only 26% said exclusive access through their plan would make higher fees acceptable. Sponsors pitching private markets should lead with the return case and keep access out of the headline.

Why It Matters

Plan sponsors weighing private market allocations now have evidence that participants will not balk at the price. The survey also shows most will not act at all. Faced with complex investment decisions, 63% said they would stay in their plan's default funds. That leaves the decision, and the fiduciary exposure, with the sponsor. It challenges the view that fee resistance is the main obstacle to adoption. Understanding is the weaker link, and the survey shows where it breaks.

By The Numbers

• 69% said stronger long-term growth potential would make higher fees acceptable, the top answer.

• 46% said a clear comparison of fees against expected benefits would make them most comfortable. Assurance that fees are competitive persuaded 18%.

• 79% said seeing example investments would make the higher cost feel justified. Among those who first said no, 40% agreed.

• 33% wrongly believed private markets are only for wealthy investors.

Zoom In

Private credit is where participant understanding is thinnest. "Private debt" was the least familiar strategy tested. Of respondents, 63% said they were at least somewhat familiar with it. Private real estate scored 74%. When asked what private debt refers to, 56% correctly picked portfolios of loans from non-bank lenders. Another 22% chose credit card debt. Private lending also ranked last on interest, with a mean rank score of 2.9. Private equity led at 1.9.

The label matters. Asked to name an investment built from packaged non-bank loans, 38% picked "private lending." Only 10% picked "private debt." Millennials favored "private credit," with 35% choosing it. Invesco advises sponsors to use "private lending" in participant materials. Managers who describe their products as private debt are using the label participants like least.

The Wrap

Participants will pay for private markets once the benefit is explained in terms they recognize. Most will hold whatever the default contains, so the sponsor's choice decides the outcome. Private credit needs the most groundwork, starting with its name. The finding rests on a hypothetical question from a manager that sells private markets strategies. It will face its first real test when target-date funds with private allocations reach participants under the proposed DOL rule, over the next few enrollment cycles.