Alternative investment managers will have to overcome high hurdles as they reassure pension funds that alternative assets are viable, according to a RBC Dexia report on global pension funds.
"Alternatives let investors down during the financial crisis. They were meant to be true to the word alternative," Dutch fund Robeco chief executive Roderick Munsters said.
"You had a return profile that was different from equities. But during the crisis, all correlations moved to one and everything moved in sync," he said.
For Hong Kong, BEA Union Investments head of multi-asset Scott Lothian said alternative managers have their work cut out for them in convincing pension funds of their long-term value.
"Before the crisis, a lot of people made a lot of money on alternatives but it wasn't pension funds," Lothian said.
"Many alternatives were sold as a panacea to pension funds looking to add alpha to meet their liabilities. I think a lot of pension funds have been disappointed that it's not some magical asset class," he said.
Alternatives, however, still have a major role in de-risking pension funds, according to the Canada-based Alberta Teachers' Retirement Fund Board chief Emilian Groch.
"Alternatives provide more of a change for the structure of liabilities. You can't get enough duration out of long bonds if you want to match your liabilities," he said.
"But if you go long-only in infrastructure you can achieve some of that. The same goes for private equity or real estate in the long term."
