You are approached by a large pension fund with assets of $50bn who currently have a very traditional (though global) asset allocation, which is 60% equities and 40% fixed income. They employ a mix of active and passive investments using the MSCI World Equity and Citigroup World Government Bond indices as their benchmark. Their long run mean return has been 5.65% per annum with 7.0% annualised volatility and a maximum drawdown of 20% which occurred between October 2007 and February 2009.

The pension fund is considering adding alternatives to their portfolio and ask you to give a presentation to the trustees who are a mixture of investment experts and members of the fund with a less technical background.

what you think that pension fund should do, highlighting both the opportunities and the risks.