Allocating to Alternatives for Corporate DB Plans

This guide outlines a role-based framework for corporate defined benefit (DB) plans considering the integration of alternative investments into their portfolios. It details how allocations to alternatives, which have grown to represent approximately 25% of average plan portfolios over the past two decades, can align with a plan's return-seeking and liability-hedging objectives. The guide specifically examines the potential benefits of hedge funds and private equity in the current investment environment, addressing key considerations for establishing these allocations. Furthermore, it discusses the importance of evaluating the liquidity aspects of alternative investments and presents a case study to aid plans in their decision-making processes. The document emphasizes the critical nature of understanding both the roles of hedge funds and private equity within the portfolio structure and the risks involved in these investments, ensuring plans can effectively manage their allocations to optimize performance in a volatile market landscape.