There are a lot of rumours in Seoul that some big institutions took an almighty whack from Bernard Madoff, but aren't owning up to it. We can't ask Mr Madoff, as he is out of circulation for the next century and a half.

That's the price you pay when you squarely confront the crystallisation of your losses. Putting aside fraud, and looking at basic marking to market, in the alternatives world, one way folks think they can deflect the pain of day-to-day volatility and investment committee aggro is to invest in longer-term products. Such assets can be illiquid, but panellists discussing appetites for alternatives at the AsianInvestor Investment Conference in Korea are leaning in that direction.

"For us its infrastructure, real estate and private equity across 25 outsourced managers," says Hee Seok Kim, head of global investment at the National Pension Service. "However, at times we have felt that the contracts were general partner oriented and limited partners couldn't exit when the crisis hit. So we decelerated investments in co-mingled funds."

Unfortunately, being unable to exit is an occupational hazard with illiquids. Investors can't have their cake and eat it too.

Commodities are more liquid, but of course bring a whole new set of investing headaches, especially if investing in futures rather than the physical itself (lest you were wondering why the oil exchange-traded fund hasn't gone up as much as the physical crude oil price).

"We're interested in commodities, but need to find a positive rolling yield," says Seop Lim, deputy director of the Employment Insurance Policy Division at the Ministry of Labor. "With contangoes [a 'contango' is where the futures price exceeds the spot price], there is a stumbling block when it comes to the rollover, and it's something we have to be very careful about."

Contangoes are a common dilemma in the commodities futures market. It's easier if you can take physical delivery, but where are you going to put a tanker full of crude oil?

"We're interested in mergers and acquisitions and corporate restructuring private equity deals, shipping and project finance as well as infrastructure," says Sung Soo Kim, senior manager of the alternative investment team at the Government Employees Pension Service.

The most exotic application of alternatives among the panellists is being done by the Korea Investment Corporation (KIC), which is not permitted to invest domestically, and is planning on increasing its assets under management from $25 billion to $30 billion sourced from the government and central bank.

"We see opportunities in leveraged loans, and core real estate in the US, and we will expand there in the second half of this year," says Dong Ik Lee, the head of the alternative investment team at the KIC.

There was not a lot of enthusiasm for hedge funds. However, you cannot hide in alternatives, because even with illiquid investments, the truth does come out eventually, even if valuations are kept at rosy levels while public markets are suffering.

It's true that after a decade of being locked in, most investments have gone up in value (apart from those that have fallen to zero), but there are many illiquid investors in Asia who have found themselves as valuation outliers in the bottom quartile of private equity when the closet door is finally flung open. Using illiquids is fine if you're doing it for the right investment reasons, but as a fig leaf that simply masks an asset declining in size, it doesn't work.