The latest research from Cliffwater, a Los Angeles-based alternative asset consultant to institutional investors, claims the best-performing public retirement funds have above-average allocations to alternative asset classes. The top 25 performing funds over a 10-year annualized period had an average allocation of 29 percent to alternatives, according to Cliffwater. By comparison, the average allocation to alternatives was 25 percent for all public pension funds. The one notable exception to the trend was the Oklahoma Teachers retirement fund, which happens to be the top-performing fund on Cliffwater's ranking after posting a 10-year annualized return of 8.8 percent. Cliffwater's analysts said the selection of traditional managers accounted for the fund's performance. There is no arguing institutional investors' growing interest in alternatives in recent years. Last year, state pension funds added another 1 percent to alternatives, mostly moving money from fixed-income. In 2006, the average public fund allocated a mere 10 percent to alternatives, significantly lower than today's average. Take a look at the slideshow of the top 10 best-performing public funds according to Cliffwater, and their average 10-year annualized return.