Using panel data on Swiss and U.S. pension funds, we show that funds holding a higher share of alternative assets are more likely to manage reported performance. These pension funds exhibit a statistically significant bunching of pension fund returns just above zero, consistent with small-loss avoidance behavior. The effect is stronger when regulatory constraints are binding. We further show that a higher share of alternative assets is associated with lower return volatility beyond diversification effects. Together, our results suggest that the valuation discretion associated with alternative assets allows pension funds to manage performance and smooth returns. Thus, higher allocations to alternatives amplify the scope and consequences of valuation discretion.