Richard: On point (2), to clarify: If I have understood your methodology correctly, you measured the ex-post 10-year volatility (or beta) of portfolios containing an average of ~60% alts and then you solved for the weightings of a traditional stock/bond portfolio (72/28) that would have exhibited an equal ex-post 10-year volatility (or beta) over the same period.

If that is indeed what you did, then you would have implicitly assumed that the returns of alt-heavy portfolios are lognormally distributed (they are not for all the technical reasons listed in my previous post), which is the same logical error made by alternative investment promoters when they make low-vol claims.

If the alternative investments held in the alt-heavy portfolios you measured experienced a outlier return in your already very limited sample of historical returns, then the ex-post volatility / beta you measured would be overstated, and accordingly, so would the equity content (72%) of your benchmark stock/bond portfolio.

And since the decade in question was favourable for equities, that could mean the performance differential you observed (1.6%) is either overstated or non-existent.