Abstract
The approach to alternatives adopted by defined-benefit (DB) plans is not based on a simple formula that can automatically be deployed in defined-contribution (DC) plans, they caution. In an exclusive interview to discuss their <b><i>Journal of Retirement</i></b> article, <b>Stephen Sexauer</b> and <b>Laurence Siegel</b> outline the conditions under which alternatives can sensibly be used as a component of DC plans. <b>DC plans are not DB plans.</b> A DC plan must meet its beneficiaries’ liquidity needs, not the sponsor’s. Because a DC participant can tolerate only a small amount of illiquidity in pursuit of a higher return, the plan must limit its exposure to alternative investments. Read the report for the other <b>Practical Applications</b>.
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