Analytical Transparency: A Practical Path Forward for Private Assets in the Total Portfolio Era

The debate over private assets in defined contribution plans has focused on the wrong problem. Transparency is the stated barrier. But the more immediate challenge for DC fiduciaries and the institutional investors who came before them is analytical: what can investors learn from the data they already have, and are they using the right tools to do so?

Institutional allocators have been integrating private equity, private credit, and real assets into complex multi-asset portfolios for years. The analytical frameworks they have developed are still maturing. The disclosure standards that DC plan fiduciaries are waiting on will not arrive before those frameworks are tested and refined at the institutional level first.

Progress on analytical transparency at the institutional level is the precondition in the sequence for meaningful progress in DC plans. The Department of Labor’s proposed rule, released in March, moves in the right direction. But the practical work of making private assets analytically legible is already underway, and the investment community has more tools to advance it than the policy debate suggests.

Disclosure is Not the Constraint

Analytical transparency and disclosure transparency are different goals and conflating them has slowed progress on the more achievable one.

The Total Portfolio Approach, which analyzes a full portfolio through a common-factor lens rather than in asset-class silos, has broad support as an organizing framework for institutional investors. The obstacle to implementing it is that the information structure of private markets is fundamentally different from the structure for public securities. Private assets report subjective valuations quarterly, often with a one- to two-quarter lag. Holdings data is inconsistent across general partners and does not align with the formats custodians use for public securities.

Waiting for private markets to adopt mutual fund-style disclosure is not a near-term strategy. Even if that disclosure arrived, it would not resolve the valuation challenge. The practical question is what investors can do with the data they currently have. The answer is more than most fiduciaries currently recognize.

The Data Already Support Better Analysis

Performance smoothing is a known feature of private asset reporting. It is a consequence of marking assets to valuation rather than to market, and it has direct implications for portfolio construction. Smoothed reported returns understate volatility and understate correlation to public markets, particularly during periods of stress when those correlations matter most.

Analytical platforms built for institutional portfolio management address this directly, using a process of return desmoothing to estimate the economic volatility underlying reported figures. These methods are in production use at institutional allocators today. They generate factor exposure estimates and risk contribution figures that more accurately reflect the behavior of the private investments, and they enable the cross-asset risk analysis that a genuine Total Portfolio Approach requires.

The output is not perfect information. Private asset modeling involves judgment that public securities analysis does not. But data-driven estimates grounded in factor analytics are materially more useful for risk management and portfolio construction than smoothed reported figures. Fiduciaries who treat the analytical gap as unbridgeable are leaving available information on the table.

For DC plan fiduciaries, the same tools are relevant, but the stakes for precision are higher. Decisions as practical as which risk figures to display on a participant fact sheet, reported volatility, or a figure that better reflects economic reality, require the same analytical infrastructure that institutional investors are still developing. That is precisely why institutional progress on this problem is a prerequisite.

What the DOL Framework Gets Right

The proposed rule’s requirement that fiduciaries document their evaluation process across six factors: performance, fees, liquidity, valuation, benchmarking, and complexity, reflects an accurate understanding of where private asset evaluation is genuinely difficult. Each factor is harder to assess for private assets than for public-market investments. None of them is unanswerable with current analytical tools.

Performance measurement is where purpose-built analytical platforms provide the most direct support. The relevant capability is factor-based analysis that spans public and private holdings, with return desmoothing applied so that exposure estimates and risk contribution figures reflect economic reality rather than smoothed reported data. Tools of this kind support the documented, systematic analysis the proposed rule calls for, even though they cannot substitute for the full scope of due diligence the Employee Retirement Income Security Act requires.

Analytical transparency, meaning a more accurate understanding of the risk profile and relative performance of a private asset allocation, is a meaningful contribution to a defensible fiduciary process. It is not a safe harbor. The practical standard for what constitutes a prudent fiduciary process for private assets in DC plans is still being defined. But the analytical infrastructure to support that process exists and is in use by institutional allocators today.

The Institutional Foundation Has to Come First 

DC plan fiduciaries are being asked to evaluate private assets under a demanding legal standard, often with fewer resources and less prior experience than the institutional allocators who have been managing these exposures for years. Those institutional investors, with dedicated investment teams, legal counsel, and established due diligence frameworks, are still developing best practices for integrating private assets into total portfolio frameworks.

The most constructive path forward is to accelerate the institutional work. Disclosure standards that could support DC plan fiduciaries will take years to materialize. Factor-based analytical platforms have made accurate, scalable private asset risk analysis increasingly achievable at the institutional level today. Building on that progress, refining the methods, expanding the client base that tests them, and documenting what works is how the investment community develops the foundation that DC plan fiduciaries will eventually need.

The tools exist. The frameworks are maturing. The question is whether the industry treats that progress as the starting point it is, or waits for a disclosure solution that addresses a different problem.

Michael Uram is Chief Product Officer at Solovis, a portfolio analytics and intelligence platform for institutional allocators and wealth management.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS STOXX or its affiliates.

Tags: Defined Contribution, Disclosure, fiduciary duties, private assets, Private Credit, Private Equity, Total Portfolio Approach