By Aaron Filbeck, CAIA, CFA, CFP®, CIPM, FDP, Managing Director, Content & Community Strategy, CAIA Association
Over the past few years, I’ve written, spoken, and thought a lot about the growing argument for integrating private markets into defined contribution (DC) plans. For a balanced view of the pros and cons, I explored this in a paper I published with a colleague in late 2024.[1]
In my view, much of the conversation has started in the wrong place: product development. I’ll admit, that’s where my own thinking began as well. We’ve collectively spent a lot of time trying to fit new products into an existing retirement system without first stepping back to ask whether the system itself is structured to support them.
In a recent podcast episode on this topic, part of my research involved comparing defined contribution systems outside the U.S. I wanted to understand how and why these plans successfully integrate complex, illiquid fund options into their offerings, whereas we have not been able to do the same.
What I found was that plan-by-plan comparisons weren’t especially helpful on their own. What was helpful was stepping back and asking what structural problems these systems are trying to solve.
As I compared the trade-offs different plans have made to integrate private markets, an analogy came to mind from digital assets. In that world, there’s a concept known as the “investor trilemma”: no protocol can be fully decentralized, secure, and scalable at the same time. Something’s gotta give.
A similar trade-off exists in DC plans. In what I’ll call the participant trilemma, there are three conditions that are very difficult, if not impossible, to maximize simultaneously:
- Full personal control: the ability for participants to select options and build their own portfolios
- Institutional-style investing: access to large-scale, illiquid, bespoke, and operationally complex investments
- Individual outcomes: the participant bears the investment risk and owns the outcome
Different systems resolve this tension in different ways. None of the models (or plans) I’m about to discuss satisfy all three conditions at once while maintaining a robust private markets program.
This framing matters because private markets, broadly defined, were not designed for a single, generic “retail” investor, which is effectively what the DC market serves at scale.
With that context, three broad “models” that illustrate these tradeoffs are worth highlighting.
Model 1: Institutional-style investing + individual outcomes, at the expense of control
AustralianSuper and NEST
Both AustralianSuper and the UK’s NEST prioritize institutional-style investing while preserving individual outcomes. The trade-off is personal control. These organizations invest like large institutions, participants own the outcome, but they have limited ability to drive the portfolio.
AustralianSuper operates as a profit-for-members superannuation fund with a strong emphasis on long-term investing, scale, and cost discipline. It presents itself as a long-horizon allocator capable of pursuing opportunities that require patience, specialized expertise, and size.
For most participants, the experience is default-led and institutionally managed. Members have individual account balances and market-linked outcomes, but they are defaulted into multi-asset portfolios that evolve over time, with asset allocation decisions made centrally.
Private markets are a core part of this model. AustralianSuper manages roughly A$385 billion in assets, with about A$85 billion allocated to private markets. These exposures are embedded within diversified pools and managed by centralized teams across both fund investments and direct ownership.
What distinguishes AustralianSuper is the extent to which it operates as an owner-operator at scale, partnering with other super funds and global asset pools and using the full institutional toolkit of co-investments, strategic partnerships, and direct investments. The result is an institutional investor operating inside a DC wrapper—not a DC plan that simply added private funds to its menu. Personal control over underlying investments is constrained as a result.
NEST, or the National Employment Savings Trust, is the UK’s government-sponsored defined contribution workplace pension scheme and one of the largest DC plans in the country. It was created to support automatic enrollment and ensure broad access to retirement savings.
NEST has close to 14 million members, roughly one-third of the UK workforce, and manages around £58 billion in assets, with significant ongoing inflows. It is expected to roughly double in size by 2030.[2]
Participants are automatically assigned to target-date funds based on age. The glide path differs from typical U.S. designs: early savers start conservatively, increase risk exposure mid-career, and then de-risk approaching retirement. The stated goal is to avoid discouraging new savers through early losses.
NEST has publicly stated an ambition to increase private market exposure aggressively by 2030.[3] Structurally, it centralizes governance and asset allocation decisions but outsources execution. It sets strategy and constraints, then partners with external managers to implement those mandates.
A good example is NEST’s partnership with IFM.[4] NEST acquired a minority stake in IFM’s holding company to help scale exposure across private equity, private debt, and infrastructure. IFM structures and manages the investments, while NEST dictates the exposures it wants—partnering through managers rather than investing alongside them.
Model 2: Institutional-style investing + personal control (kinda), at the expense of individual outcomes
APG and the Dutch pension system
The Dutch system, implemented by APG, resolves the trade-offs differently—and diverges most sharply from the U.S. experience.
APG manages over €600 billion in pension assets for roughly five million participants across the largest Dutch pension funds. Governance and policy are set by pension boards, while execution is centralized within APG across sourcing, investment decisions, and portfolio management.
Formally, the system is defined contribution: contributions are defined, outcomes are not guaranteed, and employers do not carry traditional DB-style liabilities. In practice, the experience sits between DC and DB.
Participants can see their contributions and balances, but portfolio construction and risk exposure are set collectively and adjusted automatically based on age and other characteristics. Outcomes are not promised, but they can be smoothed, so participants are not forced to lock in results based on market conditions on the day they retire.
This structure allows APG to invest like a large institutional investor, controlling portfolio construction across public and private markets subject to governance constraints. The largest fund APG manages—ABP—represents roughly €500 billion of the total, with approximately 25% allocated to private markets. Recent reforms have explicitly supported increasing private market exposure, and APG is positioned to execute that mandate centrally.[5]
Model 3: Personal control + individual outcomes, at the expense of institutional depth
UniSuper
The third model brings us back to Australia with UniSuper. While it operates within the same superannuation system as AustralianSuper, it resolves the trade-offs differently.
The key distinction is participant flexibility. UniSuper allows members to hold multiple investment options, rebalance more frequently, and direct existing balances and future contributions differently.
Private markets are integrated primarily through pooled options and external managers rather than extensive direct ownership. Compared to AustralianSuper, UniSuper preserves more personal control and cleaner individual accounting, but that flexibility constrains how far the fund can push into direct, bespoke private market investing.
In U.S. terms, UniSuper looks closer to a traditional 401(k): more participant choice, fully individualized outcomes, and tighter limits on institutional complexity.
Putting It All Together
Across all four systems, the pattern is consistent. No model delivers full personal control, institutional-style investing, and fully individualized outcomes at the same time.
The differences are not about innovation or participant sophistication, but deliberate structural choices about where complexity, control, and risk are allowed to sit. That context is often missing in the U.S. debate around private markets in defined contribution plans, and it’s the lens through which the conversation needs to be understood.
About the Contributor
Aaron Filbeck, CAIA, CFA, CFP®, CIPM, FDP is Managing Director, Content & Community Strategy at CAIA Association. His industry experience lies in private wealth management, where he was responsible for asset allocation, portfolio construction, and manager research efforts for high-net-worth individuals. He earned a BS with distinction in finance and a master of finance from Pennsylvania State University.
Learn more about CAIA Association and how to become part of a professional network that is shaping the future of investing, by visiting https://caia.org/
[2]https://fundstech.com/uk-pension-scheme-nest-changes-fund-administrator/
[5]https://www.ft.com/content/9aa53288-d650-44dc-8ba0-88d5641720eb