Investing in higher-risk, illiquid, targeted investments are part of an active portfolio and are more time-intensive than a passively managed portfolio. As such, pension funds that have adopted formal policies limit their total investments in this category to two percent of total assets in line with their broader strategic asset allocation policy. Pension funds seek portfolio diversification through a strategic asset allocation policy in which the fund or its consultants set a target percentage to each asset class—traditional and alternative investments. Allocating two percent of total assets to targeted investments contributes to the fund’s overall strategic asset allocation policy and.