Retirement Fund Choices

Private Credit & the Efficient Frontier Over the past several years, the major debt and equity asset classes have shifted higher along the efficient frontier from Cash to Private Equity. Cash, IG bonds, HY Bonds and Private Credit has taken a quantum step upward, in contrast to equities, which is only marginally better, with returns slightly higher for large caps and small cap public equities and PE. Volatility has a significant weight in the risk-adjusted return equation for each asset class and should be evaluated when evaluating IRR. Top Quartile Private Credit managers should generate ~12% IRR for both Direct Lending and Asset Based Lending strategies; and importantly the volatility measurement is ~ 50% vs. Private Equity and Russell 2000 (Russell 2000 is the most relevant index to compare Private Credit & PE since S&P 500 captures large cap stocks while Russell 2000 is better correlated to HY and PC/PE companies). Notably, Private Credit is perfectly positioned along the slope of this curve at an inflection point before which marginal return carries significantly greater risk. Capital Allocators are increasingly focused on the attractive risk-reward profile of Private Credit that is clearly shown in this chart below. "Goldilocks" funds—those managed by GPs that focus on the efficient frontier (best risk-reward) clearly lands on Middle Market Funds (loans to companies with $15M - $60M EBITDA) to strike the perfect balance. A GP with top-tier sourcing/underwriting/asset management resources and a fund size that is not too big/not to small should be deployed in 18 months, since it is not only MOIC on invested capital, but also MOIC on allocated capital that is relevant. GPs that maintain low loss rates are typically associated with top-quartile performance and are along the right part of the efficient frontier curve. There are unfortunately too many stories of GPs that have raised massive funds, funds so big that it is difficult to deploy capital compared to their prior pacing---fund size should reflect the opportunity set. It’s also important to identify the disciplined GP as it is not prudent to ramp-up risk/weaken covenant protection, provide 1x or 2x extra turns of leverage on loans to get the deal done, or ratcheting in the spread to win deal(s). Private Credit funds that can deploy efficiently, maintain covenants/attractive spreads are highly attractive. Private Credit has come of age. I am highly confident that constructing a portfolio of Private Credit’s 3 core strategies will serve investors well: 1) Direct Lending (Middle Markets Lending has the best risk-reward), 2) Asset Based Lending (Diversified Strategy of secured privately negotiated loans with a perfected interest in the underlying collateral (i.e. aircraft, property, equipment, etc.) that is structured with an average attachment point of 65% LTV and 1.25 DSCR), and 3) Opportunistic Credit (Capital Solutions, Special Situations and Dislocation). Happy Hunting.

There is no other way to say it: Our country is facing a retirement savings crisis. The latest research shows that 1 in 5 older adults have no retirement savings, and more than half worry about their financial security in what should be their golden years. At AARP, we believe that improving the health and financial security of older Americans is key to ensuring they can have a fulfilling life as they age, but our current retirement systems fall short of that goal. People are 15 times more likely to save when they can do so at work, yet nearly half of all private-sector employees — nearly 57 million people — lack access to a 401(k) plan or other retirement savings option through their employer. This article, part of The New York Times Magazine’s “Retirement Issue,” is a thought-provoking deep dive into the history of retirement savings in our country, the pitfalls of the current system, and importantly, what improvements can be made to create a more secure financial future for America’s workers. One proposal mentioned is the Retirement Savings for Americans Act, a bi-partisan bill that would create a federal retirement savings plan for millions of people who aren’t offered one at work. The legislation would build on the work AARP has been doing in states across the country to increase access to retirement savings programs, especially for those working for small businesses. Every older American deserves to retire with dignity. It’s time to make sure that goal is achievable for all of America’s workers. #RetirementPlanning #RetirementSavings #FinancialSecurity #Policy

With Union Budget 2026 around the corner, I believe this is an important opportunity to strengthen India’s long-term financial security especially in areas where reformed policies can make protection and retirement planning more accessible for Indians. A few areas that could meaningfully support this: • Tax parity for retirement plans - Aligning how annuity payouts are taxed with other pension instruments would help individuals choose products based on suitability rather than tax differences, encouraging structured long-term planning. • Enhanced incentives for protection - Improving or expanding tax deductions for life and health insurance premiums under both old and new tax regimes can make insurance affordable and widen protection, particularly for younger and middle-income households. • Inclusion-centric measures - Supporting micro-insurance, reducing cost barriers, and creating incentives tied to longer holding periods can help deepen insurance penetration in underserved segments and improve retirement readiness nationwide. For individuals, the message is simple: long-term protection and retirement planning deserve the same attention as short-term goals. The right policy can make that journey easier, but the decision to start planning early remains with each of us.

New PF (EPF) withdrawal rules in 2025 simplify access, allowing up to 100% withdrawal in some cases, merging 13 old rules into 3 categories (Essential Needs, Housing, Special Circumstances), and enabling faster access via ATM/UPI (EPFO 3.0) with auto-settlement. Key changes include increased withdrawal limits for marriage (up to 5 times), easier access for education/housing (90% for house purchase/loan), and immediate 75% withdrawal for unemployment, with full withdrawal available after 2 months jobless, plus new rules for pension annuity

Financial innovation can expand access, choice, and opportunity for investors. But history also reminds us that when markets evolve, so too must our approach to risk, oversight, and investor understanding. In my latest piece for Barron’s, I examine the US Department of Labor’s proposed changes that could help introduce private-market assets into 401(k) plans. This could represent a significant shift for retirement savers, bringing both new opportunities and added complexity around product structure, fees, liquidity, valuation, and asset allocation. Too often, innovation moves faster than education and oversight. Today, surveys show that plan participants lack a fundamental understanding of private markets and the risks they can carry. That gap must be addressed if we are to deliver on the promise of broader access while protecting long-term outcomes. This is where financial professionals play a critical role. Advisors and plan sponsors must act as both fiduciaries and educators, ensuring these investments are well understood, appropriately structured, and aligned with long-term retirement goals. The stakes are too high for retirement savers to treat this issue lightly. Read the full article in Barron’s: https://lnkd.in/ehdtmYbW

𝐒𝐢𝐦𝐩𝐥𝐞 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬, 𝐂𝐨𝐦𝐩𝐥𝐞𝐱 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬: The Case for ... Doing Nothing? 🏖️ Most endowments and pension funds in the US follow a model similar to the aforementioned Yale Model: Large investment teams consisting of veteran investors, making active bets on managers, geographies and industries with the goal of outperforming the market over the long-term. Interestingly, that idea is being upstaged by one of their own. Steve Edmundson, CIO of the Nevada Public Employees’ Retirement System (NPERS), 𝐜𝐡𝐨𝐨𝐬𝐞𝐬 𝐭𝐨 (𝐦𝐨𝐬𝐭𝐥𝐲) 𝐝𝐨 𝐧𝐨𝐭𝐡𝐢𝐧𝐠 𝐚𝐭 𝐚𝐥𝐥. NPERS, to the most part, goes against the ideas of the Yale Model and its search for complexity. 𝐈𝐭𝐬 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐨𝐟 𝐫𝐨𝐮𝐠𝐡𝐥𝐲 66 𝐛𝐢𝐥𝐥𝐢𝐨𝐧 𝐝𝐨𝐥𝐥𝐚𝐫𝐬 (𝐚𝐬 𝐨𝐟 𝐌𝐚𝐫𝐜𝐡 2025) 𝐢𝐬 𝐭𝐨 𝐭𝐡𝐞 𝐦𝐨𝐬𝐭 𝐩𝐚𝐫𝐭 𝐢𝐧𝐯𝐞𝐬𝐭𝐞𝐝 𝐢𝐧 𝐩𝐚𝐬𝐬𝐢𝐯𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬:For US stocks (35%), they are invested in the S&P. For international stocks (14%), they are invested in MSCI World ex-US. For US bonds (28%), they hold US treasuries. The only exceptions are Private Real Estate and Private Equity (12% target allocation), which they have outsourced to external managers. 𝐀𝐧𝐝 𝐭𝐡𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬 𝐬𝐩𝐞𝐚𝐤 𝐟𝐨𝐫 𝐭𝐡𝐞𝐦𝐬𝐞𝐥𝐯𝐞𝐬: Since inception, NPERS has outperformed the market return by 0,3% p.a. Compare that to CalPERS, the largest public pension fund in the US, which employs a large investment team and makes active investments in liquid and illiquid assets - yet notoriously lags its benchmark over a 20-year period and just barely outperformed over 10- and 30-year periods. It’s interesting to see that large institutional investors suffer from the same level of “ego” that I personally see in affluent investors (and admittedly, sometimes myself): We have a top-notch team, we are smarter than other investors - we can generate alpha, we can outperform the market. But can they, really? Often, the numbers tell a different story. But to me, there's an even more important learning. Many of our affluent clients think that they need to invest differently from the average retail investor simply because they have more investable capital (and maybe my many newsletter about PE and other alts don't help). After all, that level of investable capital is needed to access some asset classes in the first place, such as private equity or hedge funds, and the recent push by GPs into fundraising from affluent individuals doesn’t help either. But it’s especially in such a moment where I like to highlight the story of NPERS: It’s a massive pool of capital, run by a tiny investing team, that actively chose not to make active choices - and that is succeeding with that strategy.

Europe’s pension funds are playing it too safe.. and it’s costing us all. While US and Canadian pension giants are generating 8–11% annual returns, most continental European funds (excluding the Nordics) are stuck in the 4–6% range. Why? Because they’re avoiding the one asset class that’s consistently outperformed: private markets. Compare the numbers: 🇺🇸 US: 15.2% from private equity; 14–20% in private markets 🇨🇦 Canada: 10.9% returns (CPP); 45% in private markets 🇪🇺 Europe: 4–6% returns; 60–70% in bonds, <5% in private equity, almost no venture The takeaway is clear: Illiquidity isn’t the enemy - it’s the unlock. Private equity, infrastructure, and venture capital offer long-term value creation and compounding that bonds and public markets alone simply can’t match. Europe’s pension capital is massively underused. Imagine what reallocating just 5–10% into venture and private markets could do:  - Better pensions  - More innovation funding  - Stronger economic resilience It’s time we bring long-term capital back to long-term investing. #PrivateMarkets #VentureCapital #PensionReform #AssetAllocation #Europe #LongTermCapital

The WSJ's editorial this morning was very positive on private market assets in 401k's. What's actually happening with retirement plans, and what are the risks/trade-offs to know? Last August, the President signed an executive order pushing government agencies to "democratize" alternatives. That opened the door for private assets like private equity, private credit, real estate, and crypto in 401k retirement plans. Last week, the Department of Labor published proposed regulation that brings this one step closer to reality. Why does this matter? 1️⃣ Alternatives have historically earned higher returns. Over the past 20 years, private equity has annualized ~14% vs. ~10% for public equities. 2️⃣ Low correlation to stocks & bonds can reduce portfolio volatility over time. Real estate, for example, has been used in retirement plans for decades to smoothen returns. 3️⃣ Access to more opportunities. Public markets are getting more concentrated and expensive — there are fewer public companies today than in the 1990s, and some of the most exciting companies may stay private for a long time (or forever). But there are real trade-offs: ⚠️ Alternatives are illiquid. You can't sell a portfolio of properties in a matter of days. It takes careful planning to maximize returns. ⚠️ Private assets are complex. They require specialized diligence and research. There is a big gap between the top performing managers and the bottom-performing managers. ⚠️ Some alternatives, like gold or crypto, can be highly volatile and probably shouldn't make up a large share of your portfolio. In many ways, retirement plans might actually be the ideal home for alternatives. For long term illiquid assets, the investment timeline matches well. People naturally avoid dipping into their 401k's until retirement because of the withdrawal penalty. Most public and private pension plans use alternatives today. So how do you manage the trade-offs for everyday investors? ✅ Target Date Funds (or "Glide Path" strategies) — these shift the burden of planning and research onto the asset manager, so individuals can "set it and forget it." You decide when you plan to retire and what your risk tolerance is, and the fund invests in a mix of stocks, bonds, and alternatives targeting your goals. ✅ Modest allocations to alternatives: enough to move the needle on better returns and lower volatility, but not so much that illiquidity becomes a challenge. ✅ Investor education. Incredibly, there are still savers who are not availing of 401k matches and maximizing their contributions. The opportunity set is getting larger, so we have a lot to do to make sure investors know what tools they have and how to use them. Lots happening in this space — I plan to put out a video and more content as things evolve! 🎬 👇 Follow the Guide to Alternatives for more on private markets, alternatives, and retirement investing. #alternatives #markets #401k #retirement #privatemarkets #investing

St. James’s Place (SJP) is one of the biggest names in the UK wealth management industry. Its flagship Strategic Managed Pension Fund is sold as a balanced, professionally managed solution for retirement savers. But the performance data shows something far less flattering: mediocrity that costs investors dearly. The 5-Year Reality From 2020 to 2024, the fund produced a total return of +28.3%, which works out to just 5.1% per year (CAGR). Period (2020–2024) Annual Return 2020: –2.73% 2021: +12.71% 2022: –5.64% 2023: +11.11% 2024: +11.62% On £100,000 invested at the start of 2020, you’d now have just £128,299. Meanwhile: MSCI World returned ~+84% (~13% p.a.). FTSE All-Share delivered ~+72% (~11.5% p.a.). So SJP’s flagship fund wasn’t just a little behind. It was in a different league altogether. The Long-Term Cost of Mediocrity The real damage isn’t visible in five years - it’s in 20. Compounding is merciless. A saver sticking with SJP ends up with £270k. The same money in a global tracker compounds to £1.15m. That’s a gap of £880,000. The difference between a modest retirement and a wealthy one. Why the Underperformance? High fees: SJP charges are notorious. The ongoing costs are multiple times higher than cheap global index funds. Fees compound too - against you. Missed opportunities: The fund failed to capture the huge global equity boom of the last five years. Even the UK market, often maligned for its lack of tech giants, left SJP in the dust. Volatility without reward: Investors took hits in 2020 and 2022, but were not compensated with outsized gains in the following years. The Verdict SJP’s Strategic Managed Pension Fund is marketed as safe, stable and well-managed. The numbers show something else: a slow-growth vehicle that lags both UK and global markets, while charging higher fees. It hasn’t protected investors. It hasn’t beaten benchmarks. And it hasn’t delivered the compounding that pension savers desperately need. The lesson is brutal but clear: in pensions, mediocrity is not safe - it’s expensive. If you want your money to work for you, you don’t just need returns. You need the right returns. And SJP’s flagship fund has failed that test.

What accounts should you focus on building first to setup yourself up to be in a good spot financially? Here's a prioritized list to guide you: - Emergency Fund: Start by building an emergency fund that covers 3-6 months of living expenses. This is financial safety net, providing you with the liquidity needed to handle unexpected expenses such as medical emergencies, car repairs, or job loss without going into debt - Retirement Plan with Company Match: If your employer offers a retirement plan with a company match, prioritize contributing enough to get the full match. This is essentially free money that boosts your retirement savings. Take advantage of this benefit to maximize your long-term financial growth. - Health Savings Account (HSA): If you're eligible for an HSA, it's a powerful tool for tax-advantaged savings. Contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. - Roth IRA/Backdoor Roth IRA: After maximizing your employer match and contributing to your HSA, consider funding a Roth IRA. Contributions to a Roth IRA are made with after-tax dollars, but the account grows tax-free, and qualified withdrawals in retirement are also tax-free. This can provide you with tax diversification and flexibility in your retirement planning - Taxable Brokerage Account: Once you've taken advantage of tax-advantaged accounts, consider investing in a taxable brokerage account. This account offers flexibility with no contribution limits or early withdrawal penalties, making it a great option for additional savings and investment goals. You also can get long term capital gains rates - Go back to your 401(k) and max it out By prioritizing these accounts, you can really set yourself up well