DEFINED CONTRIBUTION

Unclear definitions for alternatives limit their use in DC plans — survey

Confusion surrounding how to clearly define what is and what is not an alternative investment is limiting their inclusion as investments in defined contribution plans, according to a first-time survey from industry group Defined Contribution Real Estate Council.

In addition, limited track records, capacity restraints and fees also impede the use of real estate in defined contribution plans.

“There is no clear definition of alternatives,” said Dave Skinner, co-president of DCREC.

“(Real estate investment trusts) are alternative investments by some; others would define it as a core (traditional) asset class,” said Mr. Skinner, who is also principal and defined contribution practice leader for Prudential Real Estate Investors.

“If you ask a room full of 15 plan sponsors what 'alternatives' mean, you'd probably get 15 different answers. The industry hasn't done a great job coming up with a standard definition,” said a consultant who responded to the survey.

The survey was completed in the fourth quarter of 2013. Questions were in an open-ended format. There were 15 survey respondents including plan sponsors, real estate and defined contribution plan consultants and money managers representing $14 trillion in total assets under management and advisement.