The Greenwich Roundtable has released a white paper on alternative investing, aimed at investors who actively invest in many types of alternatives and covering private equity, real esta
The Greenwich Roundtable has released a white paper on alternative investing, aimed at investors who actively invest in many types of alternatives and covering private equity, real estate, venture capital, hedge funds and natural resources.
The paper provides a compilation of best alternative investing practices from veteran, institutional fund managers.
In addition, the paper describes the advantages, principles, and challenges of weaving a portfolio of alternative investments into an investor’s overall fund. The importance of continually focusing on risk management and maintaining control of liquidity in constructing portfolios is firmly emphasized.
"This should be required reading for managers of pension funds and foundations and endowments," says Ed Barksdale, chairman of Greenwich Roundtable’s education committee, chief executive officer of Federal Street Partners and a member of Duke University’s investment committee. "Over the past few years many managers became overly dependent on mathematical models to build portfolios and manage risk. It’s time to get back to basics and this guide does just that, delivering a no-nonsense, straight forward approach to alternative investing."
The Greenwich Roundtable found that many institutional investors were not placing enough emphasis on economic indicators like GDP growth and inflation in constructing their portfolios
The Roundtable’s findings related to the economic cycle included the following:
• TIPS, physical commodities, and real estate are among the better inflation hedges;
• Only two assets protect investors during deflation – cash equivalents and long-term government securities;
• Public equity, directional hedge funds, and private equity flourish when the economy is growing; and
• High quality alternative managers with returns uncorrelated to the stock market can do well across all economic scenarios
The study recommends building alternative portfolios from the bottom up, limiting allocations only to what is available in top quality managers and avoiding over reliance on mathematical asset allocation and risk models, especially those too dependent on historical data.
