While institutional investors are allocating more to alternative investments, recent analysis has shown that the asset class does not help boost returns. Public Pension Investment Update: Have Alternatives Helped or Hurt? was run by the Center for Retirement Research at Boston College (CRR). It found that the investment performance of public pension funds from 2001 to 2022 averaged only 5.9%, despite increasingly larger allocations to private equity, hedge funds, real estate, and commodities. CCR looked at the returns for broad indices of alternatives and traditional equities before, during, and after the Financial Crisis. It found that alternatives substantially outperformed traditional equities from 2001 to 2007; and other than real estate, alternatives lost less than equities during the financial crisis. However, Jean-Pierre Aubry, associate director of state and local research at CRR and the brief’s author wrote that “Since the crisis, the performance of alternatives has been more mixed, with private equity and real estate rebounding somewhat, while hedge funds and commodities continue to provide lower returns.”

Finsum: A recent brief found that alternatives have not helped public pension performance due to mixed performance since the financial crisis.