The total benefit of alternative assets to pension fund portfolios

Jens Carsten Jackwerth and Anna Slavutskaya

Journal of Financial Markets, 2016, vol. 31, issue C, 25-42

Abstract: Pension funds only quite recently have explored alternative assets, prodded by financial crises that devastated equity returns and led to low bond returns. We assess the addition of alternative assets to pension fund portfolios in terms of the total benefit derived from diversification, addition of positive skewness, and the elimination of left tails in returns. During 1994–2012, adding portfolios of hedge funds produced significantly higher total benefits than adding real estate, commodities, foreign equities, mutual funds, funds of funds, as well as some counter cyclical and non-cyclical assets. Conditioning on past total benefits improves the out-of-sample performance even further.

Keywords: Hedge funds; Pension funds; Performance measurement; Certainty equivalent; Alpha (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:31:y:2016:i:c:p:25-42

DOI: 10.1016/j.finmar.2016.06.002

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