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Myth Busting: Alts’ Uncorrelated Returns Diversify Portfolios

Being alternative is not good enough

Nicolas Rabener
10 min read
12 Dec 2022

SUMMARY

  • Alternatives with lower correlations to equities & bonds did not lead to greater diversification benefits
  • Correlations often break when markets crash
  • Better metrics are required to measure the diversification potential of alternatives

INTRODUCTION

Alternative investments accounted for $13 trillion in assets under management (AUM) in 2021, nearly twice what it was 2015. By 2026, that figure is expected to reach more than $23 trillion, according to Preqin research. Boom times are here for venture capitalists, private equity (PE), and hedge fund managers.

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