The Messy Middle: Navigating Alternative Investments

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Alternative investments offer potential diversification but come with significant trade-offs in liquidity, transparency, and fees that many investors overlook. We explore why the famous "Yale approach" to investing that worked brilliantly in the 1980s and 1990s may not be appropriate for most investors today.

• Alternative investments lack daily market pricing, with most only valued quarterly
• The "messy middle" includes less liquid investments that lack transparency of public markets
• Private equity and venture capital investments typically involve significant lockup periods
• When financial crises hit, illiquid alternatives can't be accessed when you need cash most
• High fees (often "2 and 20") create significant performance hurdles for alternative managers
• Consider investing in public shares of PE firms like KKR or Apollo rather than direct private investments
• Warren Buffett's $360B cash position and Jamie Dimon selling JPM stock are market signals worth noting
• Most investors should limit alternative allocations to 10-20% of their portfolio
• True diversification requires maintaining adequate liquidity for short and medium-term needs

Join us next week as we welcome Stephen Gattuso to discuss the national debt, interest payments, and how these fiscal challenges will impact our financial futures.

Straight Talk for All - Nonsense for None


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