I’m trying to understand the distinction between these two statements in the CFA readings about Alternative Assets, which seem contradictory to me at first glance, appreciate any help…
In relation to a shift in asset allocation from 60/40 equities/fixed-income to 50/20/30 equity/fixed-income/alternative assets, the readings state:
(1) pension portfolio volatility will be reduced b/c of lower correlation among asset returns
(2) [including] alternative investments entails greater manager selection risk and larger dispersion of returns around the policy benchmark
What am I missing?