Do Hedge Funds Add Value in Pension Portfolios?

Alternatives in general and hedge funds in particular, offer an attractive complement to the traditional 60/40 asset allocation framework used by many pension plans. The analysis in this paper has shown that a carefully constructed hedge fund portfolio can outperform the 60/40 strategy benchmark over time, even as it protects the portfolio against capital drawdown. The key, we believe, is making sure that the hedge fund portfolio has a 60/40 allocation as its benchmark and outperforms it in a consistent manner. It should not be surprising, that this approach is becoming increasingly more common among the more sophisticated pension.


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