For decades, defined contribution (DC) plans have primarily invested in strategies that are indexed and correlated. Just ten companies now represent more than 35% of the S&P 500’s market value.(1)
Global retirement systems, including US defined benefit plans, Australia, Mexico and the Netherlands, among others have included private markets for decades with improved diversification and the potential for better outcomes through the accumulation stage.(2)
US retirees not only face a $4 trillion savings gap, but also the challenge of converting their nest egg into lifetime income.(3) While employers with pensions allocate on average 23% of their portfolios to private assets and embed guaranteed income through retirement, the same employers allocate ~0% of their DC plans to private markets without guaranteed income solutions.
We aim to provide purposeful access to private markets strategies as a portion of professionally managed portfolios. Our strategies are designed to improve diversification, enhance long-term returns and offer broader exposure to the real economy.
Apollo is a leading provider of retirement income through its affiliate Athene.(4) Today, Apollo, through its Vitera technology, helps savers turn assets into long-term guaranteed income streams with the ability to preserve flexibility and control.
Fiduciaries have the opportunity to modernize retirement strategies around savers’ needs: diversified portfolios, greater potential for excess return and tools that help convert savings into lifetime income.
Over $10 trillion is sitting in daily-liquid public market assets, amounting to a massive “liquidity tax” on 50-year savings that are tethered to increasingly indexed, correlated and volatile markets.(5)
Trading volume has declined. It can take five days to trade an investment-grade bond, and even longer when markets are volatile.(6)
In private markets and guaranteed income, recent innovations around product structure and architecture offer fiduciaries access while accommodating pricing and liquidity features they seek in DC and retirement products.
In guaranteed income, security doesn’t necessarily require giving up liquidity; modern solutions allow participants to convert savings into a lifetime paycheck while preserving flexibility, control and growth potential.
The Number of Public Companies has Halved
Neil Mehta
Global Co-Head of New Markets
The shift from defined benefit to DC plans in the US has coincided with a shift from guaranteed retirement income and alpha-driven strategies to low-fee, beta-driven accumulation and no clear path for spending in retirement.
Several global retirement systems have incorporated private assets into retirement portfolios for decades. Australia’s superannuation funds have grown 27x after incorporating private assets ~30 years ago; US DC assets only grew ~12.3x over the same period.(7)
Demand for decumulation strategies is universal, as retirees seek simplified, flexible solutions to convert savings to retirement income.
Strong demand for automatic, flexible retirement income
Aging Demographics Are Reshaping Retirement Savings Needs
Over 12,000 Americans are turning 65 every day, and the ability to plan effectively for retirement has diminished. Over half of Americans are worried they will outlive their savings.(9)
As demographics shift and market pressures intensify, leading firms are bringing innovation, scale and experience to help fiduciaries meet today’s challenges. Apollo, Athene and Vitera are partnering to deliver solutions built for the modern retirement landscape.
This material is for general information purposes only and is intended for plan sponsors. This material does not constitute an offer to sell, or the solicitation of an offer to buy, any security, product or service. Apollo has not made any representation or warranty, expressed or implied, with respect to fairness, correctness, accuracy, reasonableness or completeness of any of the information contained herein (including but not limited to information obtained from third parties unrelated to Apollo) and they expressly disclaim any responsibility or liability therefore. The information contained herein is not intended to provide and should not be relied upon for, accounting, legal or tax advice or investment recommendations. Certain information contained herein may be “forward-looking” in nature. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Any opinions expressed herein are current only as of the time made and are subject to change without notice. There can be no assurances that any of the trends described herein will continue or will not reverse. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of future events or results. Investing involves risk including loss of principal. Alternative investments often are speculative, typically have higher fees than traditional investments and often include a high degree of risk and are appropriate only for eligible long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase volatility and risk of loss. Past performance does not guarantee future results.
