The Total Benefit of Alternative Assets to Pension Fund Portfolios

59 Pages Posted: 21 Oct 2013 Last revised: 13 Jun 2016

See all articles by Jens Carsten Jackwerth

Jens Carsten Jackwerth

University of Konstanz - Department of Economics

Anna Slavutskaya

Ecole Polytechnique Fédérale de Lausanne

Date Written: June 12, 2016

Abstract

Pension funds only explored alternative assets quite recently, prodded by financial crises which 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 the return distribution. During 1994-2012, adding portfolios of hedge funds has significantly higher total benefits than adding real estate, commodities, foreign equities, mutual funds, or funds of funds. Conditioning on past total benefits improves the out-of-sample performance even further as total benefits are more persistent than alpha.

Keywords: Hedge Funds, Performance Measurement, Certainty Equivalent, Alpha

JEL Classification: G11, G12, G23

Suggested Citation

Jackwerth, Jens Carsten and Slavutskaya, Anna, The Total Benefit of Alternative Assets to Pension Fund Portfolios (June 12, 2016). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2343000 or http://dx.doi.org/10.2139/ssrn.2343000

Jens Carsten Jackwerth (Contact Author)

University of Konstanz - Department of Economics ( email )

Universitaetsstr. 10
Konstanz, 78457
Germany
+497531882196 (Phone)
+497531883120 (Fax)

HOME PAGE: http://cms.uni-konstanz.de/wiwi/jackwerth/

Anna Slavutskaya

Ecole Polytechnique Fédérale de Lausanne ( email )

EPFL CDM SFI
EXTRA 248 (Extranef UNIL), Quartier UNIL-Dorigny
1015 Lausanne, CH-1015
Switzerland

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
145
Abstract Views
842
rank
219,490
PlumX Metrics