Fitch Study: Alternative Investment Returns Doesn’t Beat Equities
Amongst alternative investments, only private equity outperformed equities
A new Fitch study raises new concerns about pension returns. The report shows that returns from alternative investments made by 180 state and local public pension funds from 2001 to 2017 failed to live p to the hype.
In the same period, overall allocations to alternative and equities rose from 67% to 77%, while allocation to fixed-income and cash fell to 23% from 33%.
But the higher allocation to alt did not necessarily produce higher returns.
In fact, most plans reflected average returns in the range of 6% to 7%. In comparison, a 70% equity/30% fixed-income allocation generated a moderately better average return of 7.0% compared to a 6.7% average return for a 60% equity/40% fixed-income allocation.
Fitch Study: How Assets Stack Up
Over the 17 year period, the median return from private equity and real estate outperformed both equities and fixed income.
However, commodities and hedge funds lagged both equities and fixed income.
Private equity returns were the best, while hedge funds gave the lowest returns. For more studies from firms like Fitch, Preqin, and more, be sure to check out The DailyAlts Playbook.
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