Treat Alternatives Like Cuisines, Not Distinct Assets

Investments in alternative assets (alternatives) have grown tremendously over the past decade. Drawn to their professed portfolio benefits, investors have reallocated capital from more traditional assets, like public equities and bonds, into various alternative investments. Some can hardly get enough. Yet, for all the affection, there’s nothing truly alternative about alternatives. They’re simply different flavors of the same investment options.

global AUM

To be sure, I take no issue with alternatives. The more investment choices the better, as far as I’m concerned. However, properly understanding one’s risk exposures is vital for investing success. Treating alternatives as separate assets deserving of allocation, in my opinion, only obfuscates them. There’s only credit and equity risk, even in alternatives.