Capital Allocators – Inside the Institutional Investment Industry WTT – Playing for Tomorrow
Apr 8, 2023
The discussion kicks off with a look at the mismanagement of Silicon Valley Bank's balance sheet and historical patterns of inflated asset prices. Emphasizing the need for long-term investment strategies, the conversation shifts to the significance of preparing portfolios for future potential rather than immediate returns. Insights into the evolving institutional investment landscape reveal challenges in sectors like commercial real estate and the rise of unique asset classes. The episode wraps with a focus on navigating anticipated changes amidst economic uncertainties.
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Low Treasury Yields and the SVB Example
- Two years ago, a 5-year U.S. Treasury yielded a mere 0.8%, tempting investors like SVB.
- Holding cash and waiting offered a better 2.2% return over five years.
Expand Your Investment Horizon
- Don't limit your investment choices to only what's currently available.
- Consider future opportunities like choosing a spouse—you wouldn't limit yourself to your high school homeroom.
The Option Value of Cash
- Holding cash provides valuable optionality when good investment opportunities are scarce.
- However, many investors face pressure to deliver consistent returns, making it hard to stay in cash.