Alternatives in defined contribution plans: Opportunities, risks, and best practices
Making sense of recent enthusiasm for alternatives in defined contribution plans.
A broad set of retirement investment options are available to meet the needs of your DC plan
| Comparison criteria | Collective Investment Trust (CITs) | Mutual Funds | Separate Accounts |
|---|---|---|---|
| Investment option structure | Pooled investment vehicle maintained by a bank or trust company as trustee of the CIT. The Trustee may hire a nondiscretionary investment advisor to provide nonbinding investment advice. | Pooled investment vehicle with professional investment managers. | Portfolio of assets with professional investment managers. |
| Regulation/oversight | CITs maintained by state-chartered banks are generally regulated by state trust laws and state banking commissioner. Others are generally regulated by the Office of the Comptroller of the Currency (OCC). | Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA). | State insurance departments. |
| Primary controlling documents | Declaration of trust and participation agreement. | Prospectus. | Group annuity contract and investment riders. |
| Participation agreement | Must be approved by the plan fiduciary. | Not applicable. | Not applicable. |
| Identification | Investment option name and CUSIP (if assigned). | Ticker symbol, investment option name, and CUSIP. | Investment option name and CUSIP (if assigned). |
| Where to access performance and other information | Public and secured websites of Principal. | Public and secured websites of Principal, most investment-reporting websites, and, for funds with ticker symbols, via many newspapers. | Public and secured websites of Principal. |
| Who can use | Limited to qualified retirement plans. Not available for 403(b) plans or for qualified plans that include self-employed individuals. | Qualified retirement plans, retail investors, and other indiviuduals. | Limited to qualified retirement plans. Not available for 403(b) plans. |
| Our expense structure terminology | Rate level. | Share class. | Rate level. |
| Accounting | Units are priced daily at the end of each trading day. | Shares are priced daily at the end of each trading day. | Units are priced daily at the end of each trading day. |
| Portability | No IRA portability. | Yes, but available share classes may differ. | Only within personal retirement account. |
Mutual funds
Investment expertise across equity, fixed income, and alternatives to provide diversification benefits.
Collective investment trusts
A broad range of cost-effective investments for qualified retirement plans.
Target date strategies
Active, hybrid, or passive target date strategies designed to help get your clients to and through retirement.
Real estate investment strategies
Beyond traditional public options, private real estate equity and debt can offer enhanced diversification and income potential—creating opportunities for improved retirement outcomes.
We’re focused on harnessing the potential of every opportunity to help secure an advantage for our clients.
140+ years For more than a century, Principal has helped individuals confidently reach their goals. Established in 1994, Principal Asset Management is the investment management business for Principal Financial Group®.
Over 650 Investment professionals providing a depth of knowledge, averaging 17 years of industry experience.
29th largest Manager of worldwide institutional assets
Fortune 500 Backed by the resources of a Fortune 500 company, the Principal Financial Group delivers value to our shareholders and more than 75 million customers who rely on our expertise in retirement, insurance, and asset management.
Target-date portfolios are managed toward a particular target date, or the approximate date the investor is expected to start withdrawing money from the portfolio. As each target-date portfolio approaches its target date, the investment mix becomes more conservative by increasing exposure to generally more conservative investments and reducing exposure to typically more aggressive investments. Neither the principal nor the underlying assets of target-date portfolios are guaranteed at any time, including the target date. Investment risk remains at all times. Neither asset allocation nor diversification can ensure a profit or protect against a loss in down markets. Be sure to see the relevant prospectus or offering document for a full discussion of a target-date investment option including determination of when the portfolio achieves its most conservative allocation.
Footnotes
Collective Investment Trusts (CITs) are not approved for nonqualified, 457(b) or 403(b) plans.
As of 12/31/2025.
369 managers profiled by total worldwide institutional assets as of 31 December 2024 “Largest Money Manager,” PENSIONS & INVESTMENTS, June 2025.
As of 12/31/2025.
As of 12/31/2025. See our most recent 10-K or 10-Q report for additional information and forward-looking disclosures. For other updates, visit principal.com.
Important information
Carefully consider a fund’s objectives, risks, charges, and expenses. Contact your financial professional or visit PrincipalAM.com for a prospectus, or summary prospectus if available, containing this and other information. Please read it carefully before investing.
Investing involves risk, including possible loss of principal.
Asset allocation and diversification does not ensure a profit or protect against a loss. Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options. Fixed-income investments are subject to interest rate risk; as interest rates rise their value will decline. The performance and risks of a fund of funds directly correspond to the performance risks of the underlying funds in which the fund invests. Potential investors should be aware of the risks inherent to owning and investing in real estate, including: value fluctuations, capital market pricing volatility, liquidity risks, leverage, credit risk, occupancy risk, and legal risk. Use of alternative strategies may magnify risk.
Past performance does not guarantee future results.
There is no guarantee that a target date investment will provide adequate income at or through retirement. A target date fund’s (TDF) glide path is typically set to align with a retirement age of 65, which may be your plan’s normal retirement date (NRD). If your plan’s NRD/age is different, the plan may default you to a TDF based on the plan’s NRD/Age. Participants may choose a TDF that does not match the plan’s intended retirement date but instead aligns more to their investment risk. Compare the different TDF’s to see how the mix of investments shift based on the TDF glide path.
The investment manager’s investment philosophy and strategy may not perform as intended and could result in a loss or gain.
Principal Global Investors, LLC (PGI) is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA), a commodity pool operator (CPO) and is a member of the National Futures Association (NFA). PGI advises qualified eligible persons (QEPs) under CFTC Regulation 4.7.
Insurance products and plan administrative services provided through Principal Life Insurance Company®. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities®, Inc., 800-547-7754, Member SIPC and/or independent broker-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, Iowa 50392. Certain investment options and contract riders may not be available in all states or U.S. commonwealths.
Principal Asset Management℠ is a trade name of Principal Global Investors, LLC.
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