[smabie]

Alternatives don't make up the core portfolio of large institutional investors such as pension funds. Instead, they represent a percentage of the portfolio. The purpose of this percentage is to mix in uncorrelated (or less correlated) return streams in order to boost the return/risk ratio of the portfolio.

It would be foolish in my opinion to just replace an entire pension fund portfolio with a couple ETFs. This isn't to say the pension funds are doing a good job (I don't think they are) in their allocation, but to say that everyone should just take out all of their money from hedge funds and put them into ETFs is irresponsible and not something any large investor would ever consider.