Alternative investments: Is it a solution to the funding shortage of US public pension plans?

Jun Peng, Qiushi Wang

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Since 2001, public-pension plans have increasingly relied upon alternative investments (AIs). We examine the impact of this trend on investment performance and the factors that led to the reliance on AI. Using data from 92 largest plans 2001-2014, we found AI, especially private equity, generally had a positive effect on investment performance, but the effect was small and unsustainable. We also found that plans with a lower funded ratio and higher investment return expectation were more likely to allocate more assets to AIs. These findings suggest that the prospect of relying on AIs to meet investment return expectations remains a long-term challenge for state and local governments.

Original languageEnglish (US)
Pages (from-to)491-510
Number of pages20
JournalJournal of Pension Economics and Finance
Volume19
Issue number4
DOIs
StatePublished - Oct 1 2020

Keywords

  • Alternative investments
  • hedge funds
  • investment return
  • private equity
  • public pension

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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