This is a fair point on hedge funds with regard to liquidity and valuation practices. On the other hand, I think they suffer from the same over-allocation problem. Plenty of studies reveal that the vast majority of hedge funds do not add value over a meaningful time frame. More importantly, the majority of investment staff and consultants advising trustees of public pension plans on hedge fund allocations are usually deficient in the required talent to identify the rare funds that do add value in a sustainable manner. This deficiency is often hard to detect because few provide a track record -- which is a red flag in and of itself.

For all of these reasons, I think it is fair to include hedge funds in this group, but I do agree with you that the problems with private equity and private credit funds are much worse.