Insights

Selecting and Sizing Private Markets Exposure

June 5, 2025

Our manager selection process for the private markets allocation within the IndexPlus Target Retirement strategies

Private assets make up an increasing percentage of the global investment opportunity set and merit consideration in multi-asset portfolios such as Target Retirement funds. But the details matter – private markets display significant differences in risk and return characteristics across asset classes and management styles.

In seeking to improve diversification and meaningfully impact outcomes by incorporating private markets in a Target Retirement glidepath, our product development efforts commenced not through a pre-existing partnership, rather with a robust due diligence process led by State Street Global Advisors’ Private Market Research team. Three key tenets guided our approach to manager selection and glidepath design:

1. A Single-Manager, Evergreen Solution

While evergreen solutions that offer quarterly liquidity are a necessity, we see significant benefit in allocating to one solution versus a multi-manager approach. A multi-asset offering from a single manager ensures a common objective and platform across investment decisions and mitigates operational complexity by streamlining liquidity and valuation processes.

2. Diversification and Scale

A diversified, multi-asset approach has the potential to improve risk adjusted returns over longer time horizons while mitigating idiosyncratic risks in our view. We believe a scaled product with a diverse investor base is crucial to provide liquidity. We also valued a track record. We did not want our plan sponsors and their participants to be the first dollar in to any product, nor be exposed to the risk of another large investor compromising liquidity if they chose to exit.

3. Make it Meaningful

Our modeling suggests that to maximize the potential impact, participants must hold private market exposure throughout their careers. A multi-asset strategy inclusive of private equity, debt and real assets may leave some return potential on the table relative to traditional private equity but in our view may make a greater impact on expected outcomes because it may be more suitable from a risk, return and liquidity perspective at each point in the glidepath.

The result of this due diligence process was the selection of Apollo Aligned Alternatives (“AAA”). AAA seeks to offer investors a holistic and diversified private markets offering across key asset classes while providing attractive risk-adjusted returns with downside protection. In conducting our due diligence, few if any of the strategies reviewed offered diversified exposure by vintage year, asset classes, industries and geographies with a lengthy track record. Apollo’s expertise across the asset class spectrum, and alignment with the key philosophical tenets behind our approach, suggest the use of one single strategy is appropriate across the glidepath.

In our latest paper, we offer a behind-the-scenes look into our process for selecting and sizing private markets exposure by highlighting the philosophical underpinning of our approach and the due diligence process for selecting an exposure to private markets. This work follows the north star of State Street Global Advisors’ Investment Solutions Group’s glidepath enhancement process – seeking to materially impact participant outcomes while mindful of practical considerations around investability and suitability – namely liquidity, valuation and fees.

Plan sponsors, advisors, and consultants can request the full paper by contacting us.

Disclosures

For institutional/professional investors use only.

Marketing Communication

Important Risk Disclosures

Investing involves risk including the risk of loss of principal.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

Diversification does not ensure a profit or guarantee against loss.

There are risks associated with investing in Real Assets and the Real Assets sector, including real estate, precious metals and natural resources. Investments can be significantly affected by events relating to these industries. The views expressed in this material are the views of State Street Global Advisors Investment Solutions Group through the period ended 03/05/2025 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Investing in commodities entail significant risk and is not appropriate for all investors. Commodities investing entail significant risk as commodity prices can be extremely volatile due to wide range of factors. A few such factors include overall market movements, real or perceived inflationary trends, commodity index volatility, international, economic and political changes, change in interest and currency exchange rates.

Investing in REITs involves certain distinct risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of credit extended. REITs are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs, especially mortgage REITs, are also subject to interest rate risk (i.e., as interest rates rise, the value of the REIT may decline).

The major risks associated with investing in the natural resources sector, including large price volatility due to non-diversification and concentration in natural resources companies.

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.

Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.

This document provides summary information regarding the Strategy. This document should be read in conjunction with the Strategy’s Disclosure Document, which is available from SSGA. The Strategy Disclosure Document contains important information about the Strategy, including a description of a number of risks.

Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates.

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