Masters in Business At the Money: Lessons in Allocating to Alternative Asset Classes
Jan 15, 2025
Ted Seides, founder and CIO of Capital Allocators, shares his expertise on alternative investments, having honed his skills at Yale under David Swensen. He delves into the intricacies of hedge funds, private equity, and venture capital, discussing how to effectively allocate these assets in a portfolio. Seides emphasizes the importance of understanding liquidity and fee structures while navigating entry barriers to elite funds. He also addresses common misconceptions about alternative investments, equipping listeners with strategies for diligent research and long-term success.
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Appeal of Alternatives
- Alternatives aim to improve portfolio quality by maximizing returns for a given risk level.
- They can also provide similar returns with less risk than traditional stock/bond portfolios.
Risk Spectrum of Alternatives
- Alternative assets vary in risk, ranging from private credit (similar to bonds) to venture capital (highest risk).
- Hedge funds can resemble bonds or stocks, while private equity acts like a boosted stock portfolio.
Expected Returns from Alternatives
- Expect returns on private credit to exceed bond returns due to illiquidity and credit risk.
- Private equity and venture capital should outperform stocks, with venture capital offering the highest potential gains.
