News Digest: Public pension plans eye alternatives for growth
January 31, 2023
Growing market volatility is causing broader participation in the alternatives market from public pension funds in the US. A trend that began post the 2008 global financial crisis, is now witnessing more and more state and local government pension plans allocate more to this segment comprising hedge funds, real estate, commodities and private credit.
A report quoted recent data estimates from the Center for Retirement Research at Boston College, to suggest that more than 80% of state and local government pension plans allocated 20% or more of their assets to alternatives in 2022. This represents a sharp increase from 2021 levels when only 10% of such funds made a similar allocation.
Last December, New York brought in changes to expand the basket clause in the state’s retirement and social security laws to include non-traditional investments such as hedge funds and private equity. Meanwhile, in California, the state invested $4 billion in a real estate fund, that brought their total investments in alternatives to $22 billion.