This paper studies the strategic asset allocation for an investor with risky liabilities which are subject to inflation and real interest rate risk and who invests in stocks, government bonds, corporate bonds, t-bills, listed real estate, commodities and hedge funds. Using a vector autoregression for returns, liabilities and macro-economic state variables the paper explores the intertemporal covariance structure of assets and liabilities. We find horizon effects in time diversification, risk diversification, inflation hedge and real interest rate qualities. The covariance structure gives insights into which asset classes have a term structure of risk that is different from that of stocks and bonds. The alternative assets classes add value for long-term investors. Differences in strategic portfolios for asset-only and asset–liability investors are due to differences in the global minimum variance and liability hedge portfolio. We find that the benefits of long-term investing are larger when there are liabilities.