Everyday investors have long heeded the same practical advice: Buy a collection of cheap index funds because professional stock pickers generally don’t beat the broader market over the long haul.
But now, 401(k) investors may soon be pitched a new idea that aims to boost returns and further diversify their precious retirement dollars by incorporating private equity, private credit and other alternative investments. These assets are costly, opaque and not easy to unload — the polar opposite of the beloved index fund.
This type of investing requires well-seasoned asset managers who typically demand high fees to do the vetting and the picking, and who had long worked only with large institutions, pension funds and the wealthiest families.
That raises some logical questions for the indexing public: Are these investment managers any more successful than those in the public stock and bond markets? Is it worth taking on the extra risk and expense to find out?