Private Credit in DC Plans: Opportunity, Structure and Liquidity

# Retirement

# Capital Markets

MetLife Investment Management on why institutional investors have embraced investment-grade private credit and how managers may structure investment options for defined contribution plans.

Private credit’s swift ascent into a $2.1 trillion global market , possibly on its way to $4.5 trillion in the next five years , has attracted attention from a broad swath of investors. Now, policymakers and investment managers are considering how private credit might fit within defined contribution (DC) retirement plans.

President Donald Trump signed an executive order in August 2025 encouraging the inclusion of private market and other alternative investments in 401(k) plans, potentially opening access to more than $12 trillion in assets held in DC accounts. This week, the White House completed its review of a rule proposed by the Department of Labor (DOL) designed to implement the order, clearing the way for publication and a 60-day public comment process.

Reflecting the caution of plan sponsors, many members of the NeuGroup for DB & DC Plan Management remain noncommittal about private credit. They say they are still in the early stages of gathering information and, as with any potential new offering, focused on understanding participant needs. Some are also wary of being first movers until additional clarity emerges from the DOL rulemaking process.

In the meantime, firms like MetLife Investment Management (MIM) are trying to help delineate how the asset class can fit into DC plans by drawing distinctions between the different types of private credit and thinking about potential structures for future offerings.

Defining private credit. In publicly traded fixed income, the categories are familiar: investment-grade bonds, high-yield bonds and traded bank loans. In private credit, it is important to define what the term means.

“People throw around the term ‘private credit’ a lot, but it’s important to understand what part of the market you’re talking about,” said Patrick Manseau , director of infrastructure private credit at MetLife Investment Management.

Private credit spans a wide range of risk-return profiles. In today’s market, the term often refers to leveraged direct lending—single-B buyout-style loans targeting low double-digit returns. But there is also a long-standing investment-grade segment that predates the recent boom. For decades, institutional investors have held privately issued investment-grade debt as an alternative to public investment-grade bonds.

The distinction between investment-grade private credit and other strategies matters when discussing retirement plans. Met Life Investment Management’s focus is on investment-grade private credit—transactions structured with financial covenants and other protections that may not exist either in parts of the public bond market or in covenant-lite segments of the loan market. In its private credit platform, the firm invests across corporate private placements, infrastructure debt and asset-based finance.

“Investment-grade private credit assets have been around for decades, and they’re typically structured with protections that don’t always exist in syndicated loans or direct lending,” said Jason Young , head of corporate private credit at MetLife Investment Management.

A post-GFC attitude shift. From MetLife Investment Management’s perspective, institutional interest in private credit did not emerge overnight. Rather, it accelerated following the Global Financial Crisis, when investors saw covenant-heavy private placements behave favorably during periods of stress compared with public bonds.

Private lenders could often engage directly with issuers and renegotiate terms when fundamentals deteriorated. Public bondholders typically had fewer structural protections. That experience led some institutions that were underweight private credit to revisit their allocations.

At the same time, companies increasingly turned to private markets for capital because execution can be faster and documentation more customized. Institutional buyers—particularly insurers—continue to value the higher potential returns in private credit.

“You should be getting paid more in private credit because you’re giving up liquidity,” Mr. Manseau said, describing the additional return relative to comparable public bonds as a combination of a liquidity premium and, for infrastructure debt in particular, structural premiums on project finance.

A portfolio construction tool. For many institutional investors, private credit functions less as a replacement for public bonds and more as a complement. One common approach is to carve out a modest portion—perhaps 5% to 15%—of a traditional public investment-grade allocation and replace it with private credit to seek incremental spread pickup and diversification.

“Many investors are looking at how they can take what they’re already doing in public fixed income and enhance the return profile slightly by reallocating a portion of it into private credit,” Mr. Young said. That diversification can extend beyond sector exposure.

“Only a small portion of our private portfolio overlaps with issuers in the public bond market,” he added. “That gives investors exposure to companies and financing structures they may not otherwise see.”

The DC challenge: liquidity and fiduciary concerns. While the institutional case for private credit is relatively clear, incorporating the asset class into defined contribution plans presents a set of challenges. The rapid expansion of private credit has drawn increased scrutiny from regulators and market observers, who have raised questions about valuation practices, transparency and how investments that contain fewer liquid assets could meet the daily liquidity requirements typical of such plans.

“It comes down to liquidity, fiduciary duties and concerns about valuation,” Mr. Manseau said.

In terms of liquidity, Mr. Manseau noted that portfolios are typically built deal by deal rather than through a highly active secondary market. Yet, MetLife Investment Management executives also noted that there are different levels of liquidity available within the asset class. Corporate investment-grade private credit tends to be the most liquid segment, followed by infrastructure debt and then asset-based finance.

Independent third parties can provide daily valuations—something institutional investors often require—but daily pricing does not change the underlying liquidity characteristics. Investors may have an estimate of what their investments are worth, but that does not mean they can readily sell at that price.

To get around liquidity constraints, incorporating private credit into DC plans would likely rely on thoughtful portfolio design.

One approach involves pairing a sleeve of private assets with a larger liquid allocation. For example, a portfolio might hold mostly public bonds alongside a smaller allocation to private credit, allowing public holdings to meet liquidity needs.

Another potential model that Mr. Manseau described would blend private infrastructure investments with a liquid sleeve of public infrastructure bonds. In such structures, the liquid component absorbs inflows and outflows while managers deploy private investments gradually and recycle income.

Why target-date funds may fit. As for how private credit might ultimately appear in DC plans, MIM sees target-date funds (TDFs) as a potentially more natural home than standalone options. Because TDFs have defined time horizons, managers can ladder maturities and adjust duration as the target date approaches. That predictability may make it easier to incorporate assets with longer time horizons than a standalone option subject to participant-driven withdrawals.

Consultants are also likely to play a central role as plan sponsors evaluate these structures. As Mr. Manseau noted, “No plan sponsor ever gets criticized for having a consultant check the homework.”

The case for private credit in DC plans rests on the same factors that have driven institutional adoption: diversification, incremental yield and structural protections. Whether the asset class finds a durable place in 401(k) lineups, however, will depend less on market enthusiasm than on whether sponsors can design structures that align liquidity needs with long-term investment horizons.