Anyone else (that did the BSAS) find this question confusing. I mean I get the fact that alternative investments are illiquid and typically necessitate a long time horizon, but why is this not an issue for a pension fund. Is it simply because a very low amount of the fund’s asset would be invested into these investments and therefore they do not have a material effect on the overall liquidity of the fund? J. BTW I answered A to this one…
Pension funds have long duration liabilities. Agree with regards to your second statement…pension funds hold lower percentage of alternative investments in their portfolio.