Investment Diversification Techniques

So impressed with the work the team has been doing on our Guide to Alternatives - with the 3Q version hot off the presses. These are my favorite slides this quarter to talk about 3 hot topics: 1. #FedRateCutsAreBack, who benefits? It's not just public stocks and bonds. Many alternative assets fund themselves through floating rate debt. Lower Fed rates = lower SOFR = lower borrowing costs for businesses and investors financing themselves through direct lending. Issuance to fund #PrivateEquity deals makes up the majority of direct lending. 2. Is #CapitalMarketsActivityBack too? Lower borrowing costs + valuation support + less macro uncertainty = recent rebound in M&A and IPOs. After a very slow 3 years (and disappointing 1Q), capital markets activity is back to 2021 levels so far 1H25. Private Equity wheel is turning again: financing + purchases + improvements + sale to another company (or another PE fund) or public market exit = distributions to investors again. 3. #WhatAboutSmallCaps? Small cap stocks have been outperforming large caps by 4%pts this quarter. We think that's short-lived given a soggy economy and margin pressure. More interesting place to look for accelerated growth is private markets. #PrivateEquityIsTheNewSmallCap as our Global Alternatives Strategist Aaron Mulvihill, CFA likes to say. 84% of companies with over $100mn in revenue are now private. Check out our full 3Q Guide to Alternatives through the link in comments. Aaron Mulvihill, CFA Grant Papa Aaron Hussein Kerry Craig, CFA Adrian Wong, ASA

Ahead of the CFA Institute's webinar on private markets next week, I wanted to share the CFA Institute Research Foundation's book, "An Introduction to Alternative Credit". This comprehensive guide, authored by industry leaders, explores the growing importance of alternative credit investments in today's market. As traditional bank lending tightened post-2008, alternative credit emerged as a crucial player, offering bespoke solutions outside the traditional fixed-income market. The book delves into various sub-asset classes like Direct Lending, Collateralized Loan Obligations, Infrastructure Debt, Trade Finance, Consumer Loans, and Venture Debt, detailing their unique characteristics, risks, and returns. Highlighting the resilience of alternative credit in volatile markets, the book's authors discuss how its customized nature can mitigate broader macroeconomic risks and offer superior risk-adjusted returns through lower volatility and correlation to other investments. For anyone looking to deepen their understanding of alternative investments, this book is a must-read. It not only covers the fundamentals but also offers expert views on opportunities within private credit. 👉 Dive into the future of finance with "An Introduction to Alternative Credit", which is attached as a PDF. #AlternativeCredit #PrivateCredit #InvestmentStrategies #CFAInstitute #CFA #FinancialMarkets #FinanceBooks #InvestmentEducation

Investors ask Founders to move fast. We should hold ourselves to the same standard. Has anyone noticed this irony in early-stage investing?  Founders are told to move fast/iterate/show momentum and yet many UK investors still take 3/4 months + to complete a pre-seed deal 🤔 Too many early-stage investors still fail to recognise that at pre-seed data is sparse and the real risk lies in missing the right people, not in a missing document in a data room... Whilst some deals require more diligence than others, speed is still key. In October, my good friends at Passion Capital introduced me to a founder they’d just backed. We spoke the following day, I reviewed the data room and signed the SAFE and wired the money two days later. I hope this isn't recklessness but realism of the reality of pre-seed deals. However, it is also portfolio diversification that allows me to move quickly. Why? As I now have more than 40 active angel investments at different stages of growth, this breadth means I don’t need each company to succeed; I need a few to outperform. Diversification allows me to make fast, conviction-based decisions, knowing that any one failure is manageable in the context of the whole portfolio. And that balance can be tested. A company I’d invested £65k into collapsed when its acquirer pulled out at the eleventh hour. This is the nature of pre-seed - I had invested recently knowing its risky nature and the generous upside on offer. However, the lead investor had to absorb far more stress from others who’d had more concentrated portfolios, even though they had lost smaller amounts. (Diversification doesn’t just protect capital; it protects psychology too). Ultimately, I feel that speed and risk-taking aren’t necessarily opposing forces when investing through a portfolio lens. The more diversified your exposure, the more quickly and decisively you can back founders at the very same pace at which we ask them to move.

Portfolio diversification is top of mind for investors right now – and bitcoin’s potential as a portfolio diversifier is driving investor interest in the cryptoasset. Bitcoin investors are deeply focused on several of its key attributes: the uncorrelated nature of bitcoin and its interplay with geopolitics. But what about risk? Is bitcoin a “risk on” or “risk off” asset? Our answer: it’s not that simple. We explore this issue in our latest insight as part of our commitment to help educate investors about this new asset class. What we’ve found is that, in short, bitcoin can be a unique portfolio diversifier. We believe its nature makes it unsuitable for the risk on/risk off framework, and most other traditional finance frameworks. On a standalone basis, bitcoin is a risky asset. But we believe that bitcoin is an asset with risk and return drivers that are distinct from traditional asset classes and that, over the longer-term, its fundamental drivers have been starkly different, and in many cases inverted, versus most traditional investment assets. And yes, we maintain this conviction even as short-term market trading behavior diverges from what bitcoin’s fundamentals would suggest. We recognize that bitcoin is in the early stages of its journey. I encourage you to read our latest insight to better understand the very unique nuances of this new asset class. https://1blk.co/3TAErHS

The Dollar Isn’t Safe Anymore... The FT recently ran a piece highlighting the dollar’s vulnerability - a reminder that even the world’s reserve currency isn’t immune to pressure. For many investors, especially expats holding wealth in USD/AED but planning to spend in another currency, this isn’t just a headline. It’s a direct threat to purchasing power. Imagine this: you’ve built up a solid portfolio in dollars over the years. You feel comfortable, knowing your capital is secure. But when the time comes to send your children to university in the UK, or retire in Europe, you discover the dollar has weakened. Suddenly, those carefully accumulated dollars buy you less. All that planning, all those years of disciplined saving - quietly eroded by an exchange rate move outside your control. This is where hedging comes in. At its simplest, hedging is financial insurance. You accept a small cost today to protect yourself from a potentially bigger loss tomorrow. It doesn’t eliminate risk - nothing does - but it helps ensure that your long-term plans aren’t derailed by short-term currency moves. So what does this mean in practice for those with dollar assets? ~Currency forwards or options: Tools that allow you to lock in exchange rates ahead of time. ~Multi-currency accounts: Matching your assets more closely with your future spending needs. ~Diversification: Holding a mix of assets across regions and currencies, so you’re not overexposed to one outcome. ~Funds or structured solutions: Many come with built-in currency hedges, giving you smoother returns without constant monitoring. The key point is this: hedging isn’t about trying to outguess the markets or chase extra returns. It’s about resilience. It’s about ensuring that when you finally need your money, it delivers - wherever in the world life takes you. As the FT put it, the dollar is showing cracks. For investors, the question is whether to stand exposed or to take sensible, measured steps to safeguard the value of their wealth. The FT article that inspired this is in the comments below. Are you riding the Dollar downwards against your currency of spend or have you taken pragmatic steps so soften the decline? #WealthManagement #ExpatFinance #CurrencyRisk

Equity-Bond-Correlation hits new high The classic 60/40 portfolio relies heavily on one key assumption: when equities fall, bonds rise to cushion the blow. But when inflation dominates the macroeconomic backdrop, the traditional stock-bond hedge breaks down. Higher-than-expected inflation triggers rate hikes, which simultaneously depress bond prices and compress equity valuations. So instead of diversifying each other, both asset classes move in tandem. For multi-asset portfolios, the implications of a structurally positive stock-bond correlation are profound: Higher Portfolio Volatility: Without the offsetting effect of bonds, the overall volatility of a balanced portfolio increases, even if the individual volatility of stocks or bonds remains unchanged. Lower Sharpe Ratios: Higher portfolio volatility combined with co-dependent downside moves naturally degrades risk-adjusted returns. The Death of Passive Diversification: Simply mixing traditional equities and nominal bonds no longer provides adequate downside protection during market stress. To maintain the same risk-adjusted targets in an inflation-driven regime, asset allocators must look beyond the traditional 60/40 blueprint. True diversification now requires looking toward alternative risk premia, commodities, trend-following strategies, and inflation-linked assets that do not rely on a negative equity-bond correlation to manage downside risk. #investing #equities #bonds #diversification

Why Alternatives, and Why Now? Markets shift, cycles turn, and investors ask the same question: How will alternatives hold up when the tide changes? We’ve run the numbers, mapped out the scenarios, and here’s the takeaway: Alternatives remain relevant across bull, bear, and base cases—but how you allocate matters. 🔴 Bear Case: Market Disruption Recession, geopolitical risk, and tighter liquidity? Equity markets struggle, defaults rise, and risk tolerance fades. • Private Equity: Distressed buyouts gain traction as secondary markets pick up bargains. • Macro Hedge Funds: A bright spot—volatility creates opportunities in FX and rates. • Private Credit: Defaults climb, but high-quality credit holds steady. • Infrastructure: Defensive assets like utilities and essential services remain resilient. ⚪ Base Case: Stabilization & Modest Growth Rates stabilize, inflation stays in check, and markets tread water. • Private Equity: Mid-market buyouts and secondaries thrive, while defensive sectors like healthcare attract capital. • Macro Hedge Funds: Systematic strategies benefit from macro trends. • Private Credit: Direct lending remains a steady performer. • Infrastructure: ESG and sustainability-linked projects attract capital. 🔵 Bull Case: Accelerated Growth Global expansion, rate cuts, and rising optimism fuel risk-taking. • Private Equity: Tech, AI, and healthcare see surging valuations. • Macro Hedge Funds: Trend-following strategies ride the market wave. • Private Credit: Yield-seeking investors move into structured financing. • Infrastructure: Capital floods into renewable energy and transport projects. My Take? The case for alternatives isn’t binary—it’s about resilience, flexibility, and knowing where to lean in. When equity beta wobbles, alternatives offer a playbook for every market regime. As Howard Marks put it: “You can’t predict. You can prepare.” Are you positioned for what’s next? #Investing #Alternatives #Markets #PrivateEquity #MacroHedgeFunds #PrivateCredit #Infrastructure

Is Bitcoin just a tech stock on steroids? 🤔 Many headlines want you to think so, especially when you see Bitcoin and the Nasdaq moving in sync. But here's the real deal: Over the past decade, the correlation between Bitcoin and the 3x leveraged Nasdaq ETF has averaged just 0.04. Yes, you read that right—essentially no relationship at all. 📉 This raises an important question: Are we oversimplifying Bitcoin’s role in the financial world? 💭 Let's break it down: Visual Similarity ≠ Actual Correlation: While charts may look alike 📊, the data shows that Bitcoin often moves independently of the Nasdaq. Unique Drivers: Bitcoin’s price is influenced by factors like adoption rates, regulatory changes, and macroeconomic trends—not tech earnings or market sentiment. 🚀 Liquidity Sensitivity: Both Bitcoin and the Nasdaq are risk assets, sensitive to liquidity 💧. But this shared sensitivity doesn't mean they're the same. Bitcoin has its own, distinct set of drivers. 🔍 Bottom line: Bitcoin isn't just a turbocharged Nasdaq proxy. It's a unique asset with a potential role in diversifying tech-heavy portfolios. 🛡️ Understanding this could change how you approach your investments. 💡 Ready to explore what makes Bitcoin truly different? Dive deeper and challenge the myths by reading the article below. P.S. Found this insightful? Repost it for your network ♻️ MarketVector Indexes Steven Schoenfeld Joy Yang Raline Sexton Jonas Weber

Just one month into 2026, a number of our base case projections for the Year Ahead have already materialized. But portfolio management goes beyond point forecasts. Now is a good time to review allocations, rebalance, and diversify—especially as geopolitical uncertainty and government intervention widen the range of possible market outcomes. So, what should investors do now to position for both a broadening opportunity set and growing risks of market volatility? -Commodities: We’ve increased our gold price target to USD 6,200/oz through September, and expect a modest decline to USD 5,900/oz by year-end. We favor up to a 5% portfolio allocation to gold as a long-term hedge against geopolitical risks. Silver remains highly speculative—so size allocations accordingly. -Currencies: Align portfolio currency with spending and liabilities. For larger investors, diversify across major currencies. Tactically, we see upside for the Chinese yuan, Australian dollar, and Norwegian krone versus the US dollar. -Tech and equities: Stay invested, but broaden exposure—beyond AI enablers to application-layer stocks, and across US sectors (financials, health care, consumer discretionary, utilities) and regions (Europe, China, Japan, US). -Fixed income: Tilt toward quality bonds and mid-curve duration; be cautious with long-duration exposure. -Alternatives: For risk-tolerant investors, add resilience with hedge funds (non-directional, discretionary macro, multi-strategy funds, merger arbitrage), private equity, real estate, and infrastructure. Market moves can create concentrated exposures that may require rebalancing. We believe a well-diversified core portfolio is the best way to position for uncertainty and protect and grow wealth. For more, read the latest CIO Alert “Taking stock and looking ahead”

I just came across a new report on India’s alternative investment landscape, and the role domestic institutional capital can play. Domestic institutional investors (DIIs) — pensions, insurers, banks — hold long-term capital that is patient, resilient and aligned with India’s priorities. Yet only a small share finds its way into AIFs. They could well be the next wave of investors shaping India’s innovation economy. In less than a decade, AIFs have changed how young companies raise capital. Venture funds have backed founders who built our digital economy. Debt and real-estate AIFs have supported enterprises, strengthened ecosystems and created jobs. Kudos to Indian Venture and Alternate Capital Association (IVCA), 360 ONE Wealth and Crisil for making a compelling case for greater DII participation: 1. AIFs a proven, high-growth asset class AIF commitments reached ₹13.49 lakh crore in 2025, growing at 31% CAGR. This is no longer an experimental category. 2. VC funds have outperformed public markets VC funds delivered 22.9% pooled IRR and beat the Sensex in every cycle since 2022 (see table below). 3. India’s startup ecosystem needs more domestic risk capital As the world’s third-largest startup hub, India depends on VCs to fund early innovation. DIIs can bring stability that foreign capital may not. 4. DIIs already stabilise public markets, and can do the same in private markets From FY20–FY25, DIIs invested ₹14.3 lakh crore in equities — 10x FIIs. The same steady capital can anchor private markets. 5. Global peers allocate heavily to alternatives While global allocations range from 25–40%, Indian insurers have invested under 1%, and EPFO/NPS have not begun. 6. AIFs can help manage liquidity needs. 47% of debt AIFs returned at least half the capital within 3.1 years; real-estate AIFs in 4.2 years. These distributions suit insurers and pension funds. What will it take for DIIs institutions to participate? 1. Build comfort and understanding Most institutions haven’t used the limits available. Awareness of strong VC and debt AIF performance remains low. 2. Strengthen trust through transparency Clear governance, valuation norms and reporting matter. Standardised PPMs, audits and dematerialised units have improved trust, and will continue to. 3. Make participation simpler Operational hurdles still deter investors. Clearer guidance and predictable processes can ease entry. If even a part of DII capital flows into AIFs, it can fuel innovation, build stronger companies and expand opportunity across India. It is a chance for India’s own capital to build India’s future. #venturecapital #AIF #insurance #pensionfunds Image from the report. Link in comments