Checking in: An update on specialty and sector funds in DC retirement plans

Seek balance in offering niche investments with prudence

At year-end 2025, our research detailed in Specialty and Sector Funds in DC Retirement Plans indicated that while gold is often viewed as a reliable asset during periods of market volatility, its inherent drawbacks make it less suitable for retirement plan investment menus.

For plan committees seeking diversification beyond traditional stock and bond solutions, we outlined how a public real estate securities fund, which invests in publicly traded real estate investment trusts (which are equity securities “stocks”), can be a more balanced “specialty solution” to provide breadth of choice and the potential for enhanced diversification.

Depending on the plan participant, there can be temptation to invest in niche solutions, both within and outside of retirement plan accounts. Within defined contribution retirement plans such as 401(k) and 403(b) plans, there are important fiduciary considerations when designing an investment menu for the best interest of plan participants.

Specifically, certain specialty or “sector” funds may be less appropriate for many participants due to being overly concentrated, tied to specific macroeconomic themes or narrow return drivers, or prone to unpredictable performance in terms of total returns and diversification benefits. Public equity REITs offer broader diversification, strategic flexibility and a more balanced choice as specialty offerings for participants.

Why gold’s performance is important to evaluate

As shown in Specialty and Sector Funds in DC Retirement Plans, with very niche, uncorrelated investments like gold, it is important to evaluate performance in a variety of volatile and uncertain market environments. Specifically, evaluating volatile periods for the global stock market (MSCI ACWI - All Country World Index) shows that while gold’s downside protection is evident in certain periods like the global financial crisis, it is an inconsistent hedge against market volatility and uncertainty.

This has continued into 2026, as shown in the "2026 Performance Amid Market Decline and Recovery Through June” table, with gold’s downside participation during the stock and bond market declines in March with the onset of armed conflict between the U.S./Israel and Iran, and difficult performance in the ensuing months.

2026 performance amid market decline and recovery through June

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*Source YCharts, Inc. (“YCharts”)

SPDR® Gold Shares (GLD) is shown to capture daily performance and seeks to track the price of gold. For illustrative purposes. Indices cannot be invested in directly. Past performance is not indicative of future results.

Please note that risk should always be considered alongside return performance. Diversification does not eliminate risks. Asset classes will vary significantly, and a positive outcome can never be predicted for any particular asset class or security. Comparison in the chart does not include any investments fees/charges. Investors cannot invest directly in an index.

This lack of consistency in volatile environments — along with longer-term periods of subdued and difficult performance — supports not offering an overly focused sector or specialty fund, such as a gold fund, in DC retirement plan investment menus.

Main takeaway: Evaluating specialty investments through a fiduciary lens

Events and market activity in 2025 reignited interest in gold as it reached record highs and gained just over 60% for the calendar year. This was driven by investor demand for hedges due to policy uncertainty and high stock market valuations. The gains coincided with expectations of continued interest rate cuts and a potentially weaker U.S. dollar. So far, 2026 has had less clarity on interest rate policy along with a sharp reversal in gold’s performance.

For retirement plans, it is important to balance providing participants with access to a variety of investment categories for both long-term strategic needs and, to an extent, potential near-term tactical opportunities. While gold can play a role in hedging risk and macro uncertainty, retirement plans and participants can potentially benefit further from more diversified investments. These include niche offerings that can combine potential price appreciation and income for applicable situations and broader market participation, such as with active or passively managed equity REIT funds.

Disclosures

Comparisons between real estate securities and gold reflect different asset classes with distinct risks, return sources and market drivers. REIT performance generally includes income distributions, while gold reflects price return only. Both investments involve risks of loss and may experience substantial volatility. Past performance is not indicative of future results.