Indeed, when the median return of a traditional 60/40 model has offered on par returns during a 10-year average period, board members are also wondering if complex assets classes are truly offering an illiquidity premium, he added.
Read: Global asset owners pursuing alternatives, concerned about AI concentration: survey
Diversification has been essential for enhanced returns and risk reduction, said Groch, noting investment teams and boards have to consider all potential asset classes that make sense. “The traditional strategic asset allocation process is being refined.”
Boards need a bigger overview lens — not just of allocations, but a total portfolio approach — that explains how involved a plan sponsor is in a particular trend, like artificial intelligence, across its strategies, he added.
For Gary Timlick (pictured centre), chair of the investment committee at the Winnipeg Civic Employees’ Benefits Program, alternatives are represented in about 40 per cent of the plan’s portfolio mix across real estate (10 per cent), infrastructure (14 per cent) and private debt (16 per cent).
Also on the panel, Pierre-Luc Chénier (pictured right), director of strategic issues at the British Columbia Municipal Pension Plan, said there’s concern around valuations since private assets are priced periodically, leading to set assumptions in an asset liability model. “We bring more volatility in those assumptions to ensure that we are actually pricing the risk in a truer fashion.”
Alternatives carry the benefit of diversification for plan sponsors, he noted, since the long-held assumptions that when stocks fall, bonds hold can’t be trusted entirely anymore. These assets also provide a plan sponsor with inflation protection and long-term growth potential.
And crucially, he added, exposure to alternatives offers predictable returns or income streams. “That longer, steady path has a real good payoff for us because it protects the plan against requiring contribution changes.”
However, Chénier said there’s a slowdown in cash returns during this cycle, which is putting an emphasis on liquidity management.
There’s additional complexity for ongoing diligence in alternative asset fund structures, said Groch. “These are long-term marriages. These are not things you can get in and out of very quickly.”
Read more coverage of the 2026 Alternative Investment Conference.