Traditional asset allocation generate real returns through participation in economic growth and directional risk premia. The right combination of hedge funds may generate real returns through relative value opportunities, flexibility, and structural asymmetry and match the compounding effect of positive inflation through more regular absolute returns. The question is not where hedge funds “fit” in a pie chart.

The better question is:
How much of your real return objective should depend on market beta — and how much should depend on the alternative risk signature of diversified alpha?

That is ultimately a capital allocation decision, not a labelling exercise.

The combination of two distinct real-return methodologies creates a portfolio that is less dependent on a single macro regime. This increases the probability of growing investments reliably over a finite investment horizon.