Equities have outperformed alternatives since the financial crisis. Given the high fees generally associated with hedge funds, some institutional buyers are questioning whether the supposed benefits of alternatives are worth their costs.

High-profiles examples include California Public Employees' Retirement System and New York City Employees' Retirement System, both of which have recently pulled back from hedge funds.

Karen McQuiston, managing director at Prudential Global Investment Management, part of   (PRU) - Get Report , said the recent drive to dump all alternative funds misses the bigger picture.

"Alternatives encompass a very wide range of strategies and performance is period-dependent," said McQuiston. "For example, while equities outperformed most alternatives since 2009, the reverse is true when considering the full period from 2000 to 2015. And fixed income has enjoyed an outstanding period of performance over these particular time frames."

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Instead, McQuiston encourages investors to focus on the role that each asset is meant to play in their portfolio, rather than just on period-dependent performance.

For instance, alternatives as a whole are generally expected to diversify the more traditional assets held in the portfolio, but diversification potential varies greatly. Real estate did appear to be a very effective portfolio diversifier, delivering significant uncorrelated returns, according to McQuiston. In the hedge fund space, McQuiston found that macro strategies offer strong potential for diversification, and relative value demonstrated a low exposure to the equity market.

But McQuiston found certain hedge fund strategies to be less attractive, with consistently high correlations to equity. For example, she found that the returns of fund of funds and event-driven hedge funds were to a large extent be explained by market beta factors.

"The characteristics associated with specific strategies may or may not be desirable to a given investor, depending on their investment profile and objectives," said McQuiston, adding that manager selection is critical.

"Just as there is a great deal of variation among characteristics of the strategies we studied, within each strategy there is a very wide dispersion across managers," said McQuiston.