Governance, Scale, And Liquidity: Lessons From US Public Pension Funds

We analyse the performance and allocation of 79 US public pension funds from 2008 to 2022 with the goal of finding insights into what drives pension fund returns and drawing lessons for institutional investors. We find that most of the performance of top funds come from Strategic Asset Allocation decisions (SAA). We also find that while hedge funds can be an attractive diversifier for large allocators, they are not as attractive for smaller ones. Finally, we suggest that using futures can be an effective way to maintain required liquidity while improving capital efficiency.