Evaluating Benchmarks and Asset Allocation for a Pension Fund

You are a portfolio manager responsible for a large pension fund that has a strategic allocation aimed at maximizing long-term returns while maintaining sufficient liquidity and risk levels appropriate for the fund's beneficiaries. The fund has a broad investment mandate that includes equities, fixed income, real estate, and alternative investments.

Recently, the fund's performance has underperformed its target benchmark over the past five years. The board of trustees is concerned about this underperformance and has tasked you with performing a comprehensive performance evaluation of the fund. They specifically want to understand whether the current benchmark is appropriate and if the fund's asset allocation aligns with its strategic objectives.

Your essay should address the following:

1. Discuss the importance of having an appropriate benchmark in performance evaluation.
2. Analyze whether the current benchmark is suitable given the fund’s investment strategy and risk tolerance.
3. Propose alternative benchmarking methods or indices that may better reflect the fund's objectives.
4. Outline potential adjustments to the fund’s asset allocation to align better with its benchmarking and performance targets.