Mercer Investment Consulting is talking to a its largest pension fund clients about increasing allocations to alternatives to a range of 20% to 25%, a marked jump from 2003 when clients were looking at a maximum of 10%.

Many of the funds Mercer is talking to started looking at alternatives three years ago. At that time managers were unwilling to diversify away from equities because they were still recovering from the market lows of 2001 and 2002.