Alternative investments and public pensions.

Position:News & Numbers - Brief article
 
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Public pension plans have boosted their holdings in alternative assets, defined as private equity, hedge funds, real estate, and commodities, more than doubling their holdings between 2005 and 2015 (from 9 percent to 24 percent), according to "A First Look at Alternative Investments and Public Pensions," a brief by the Center for Retirement Research at Boston College. This shift reflects a search for higher returns, a hedge against other investment risks, and diversification.

The brief looks at how the shift has affected returns and volatility over two periods: 2005 to 2015 and 2010 to 2015. Looking at investment returns, an increase of 10 percent in the average alternatives allocation was associated with a reduction of 30 to 45 basis points, primarily due to hedge funds. Alternatives did not have a statistically significant effect on volatility; hedge funds reduced...

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