Thread by @dinozuco

What is the investment case for #alternative asset investing in a nutshell?

Here are some of the key considerations in this thread 👇

1. For many decades, the conventional wisdom around #investing has comprised a roughly 60%/40% portfolio of equities and bonds

2. However, the world currently finds itself in a tough position - #equity valuations have run incredibly hard for a long time, but at the same time #investors will have a hard time recycling from equity into debt due to historically low interest rates

3. So what do you do if you’re worried that your historic way of thinking isn’t going to hold up in the new world? THIS is where alternatives play a role for a portion (not all) of your #portfolio

4. Because alternatives comprise unlisted, illiquid, more direct investments, the return profile tends to be far more correlated to the performance of the actual underlying asset you invest in, and less to do with price swings driven by the larger #market. Lack of #correlation

5. This means that you can future proof your investment returns in an increasingly uncertain world, because of your traditional investment portfolio takes a turn for the worst, it doesn’t necessarily mean your alternatives will follow suit…

6. Other benefits include the ability to generate higher absolute value returns due to unique market positioning, better behaviours as your money is locked up, tax efficiency due to the clever #tax structuring, and better alignment if your investment manager invests alongside you

7. Developed market #institutional investment portfolios can be between 20% and 30% weighted to alternatives. Individuals, especially in #SouthAfrica, are far less so. Why? Education and Access are some initial guesses…

8. However, businesses such as @WAAM_SA are working hard to change this. I would suggest giving them a follow if you would like to learn how…

9. Another common misconception is that alternatives are riskier. This consideration is all about the nature of the underlying investment! Alternatives often comprise private market forms of traditional investments - eg a listed #Bond vs private loan…