Chicago Booth Review Podcast Will alternative investments underperform?
Dec 24, 2025
In this engaging discussion, Joe Pagliari, a scholar of real estate finance at Chicago Booth, dives into the intriguing world of alternative investments. He scrutinizes the shift of US pension funds toward private equity, questioning whether these strategies will yield the expected returns. Joe reveals the dangers of valuation opacity, the underperformance of non-core funds, and the impact of excessive risk-taking. With sharp insights into fees and the allure of leverage, he offers actionable recommendations for institutions to effectively navigate this complex landscape.
AI Snips
Chapters
Transcript
Episode notes
Swenson Sparked The Alt Investing Shift
- David Swenson's Yale strategy popularized private-market allocations by claiming an illiquidity premium for long-horizon endowments.
- That success spurred widespread imitation and a large shift from 60/40 portfolios into alternatives.
Volatility Is Laundered In Private Markets
- Private-market returns understate volatility because valuations are not mark-to-market frequently.
- That understatement inflates apparent risk-adjusted returns and can mislead institutional investors.
Three Tiers Of Real Estate Risk-Return
- Core, value-add, and opportunistic real estate map neatly onto low-to-high risk-return profiles.
- Core is stable income, value-add requires active improvements, opportunistic includes ground-up development.