Investment Diversification Techniques

Explore top LinkedIn content from expert professionals.

  • View profile for Hugh MacArthur

    Chairman of Global Private Equity Practice at Bain & Company - Follow me for weekly updates on private markets

    26,975 followers

    Private Thoughts from my Desk……………#22 We just published our annual Global Private Equity Report, and this year we call attention to one of the smallest – but most dynamic – corners of this industry…… Secondaries. Secondaries is a catchall term these days for all kind of “liquidity solutions”. Most of the capital is deployed in either traditional LP-led secondaries or GP-led continuation vehicles, which have surged in recent years to account for around half of Secondaries transaction volume today. But there are also strip sales, NAV-based lending, preferred equity solutions, etc. The industry has gotten quite creative! I mentioned that Secondaries is a smaller market………… so why care? The fact that Secondaries is small is a big reason why people should care! To give a sense of scale, with global Secondaries transaction volume of around $120B annually, the market provides only ~1% liquidity for the ~$20T AUM alternatives industry. By comparison, the US public equity markets turn over more than $200B in assets daily. Of course, most alternatives strategies are inherently illiquid. Investors can’t expect to get liquidity with the same ease as public markets. But is there a reasonable place between the current 1% private markets liquidity and public equities for investors to cash out when they need or want to……..? Demand for Secondaries would suggest that the market could indeed be much bigger. LPs feeling the current ‘liquidity squeeze’ or proactively rebalancing their portfolios are increasingly selling stakes. GPs looking to hold onto their best assets while providing LPs liquidity (and securing some DPI) are driving demand for continuation vehicles– 2024 is poised to be the biggest year ever for these transactions. And, as more private wealth comes into alternatives, investors are finding Secondaries are a great way to gain exposure. Secondary funds offer diversification, an accelerated J curve, and an attractive risk/return profile. In fact, Secondaries is the only alternatives asset class where even the bottom quartile delivers a positive return (see the chart below). Read about Secondaries and more in Bain & Company’s 2024 Global Private Equity Report here https://lnkd.in/ejheN_sf. #privateequity #privatemarkets #privatethoughtsfrommydesk

  • View profile for Zack Ellison, MBA, MS, CFA, CAIA
    Zack Ellison, MBA, MS, CFA, CAIA Zack Ellison, MBA, MS, CFA, CAIA is an Influencer

    Venture Debt Investment Fund Manager | Podcast Host | Author | 100,000+ Newsletter Readers | LinkedIn Top Voice

    17,973 followers

    A Case for Broadening Retail Access to Private Markets Alfonso Ricciardelli, CFA, penned a thought provoking piece for the CFA Institute's Enterprising Investor blog that asset allocators and wealth advisors should consider. Alfonso makes the following points: - Private market opportunities offer an alternative risk-return profile that could benefit a retail investor’s portfolio through diversification. - But these opportunities are often overlooked, and retail investors are underrepresented. - Private markets are more insulated from daily investor sentiment because their performance is driven by more fundamental factors. -Private credit offers returns that are not subject to daily market fluctuations, providing much-needed diversification in an investor’s portfolio. - Ultimately, a more balanced investment strategy that includes private market allocations—subject to well-informed investor decisions—could potentially offer a more stable and diversified portfolio. To learn more about private credit, one of the best resources on the market is “An Introduction to Alternative Credit,” which Alfonso Ricciardelli, CFA co-edited with Phil Clements, CFA, CAIA, FDP for the CFA Institute's Research and Policy Center. ➡Download here: https://lnkd.in/eybeWWrB #CFA #CAIA #CFP #AlternativeInvestments #Investing #PrivateCredit #AlternativeCredit #VentureDebt #wealthadvisor #familyoffice

  • View profile for Benedikt Langer

    Private lending to real estate investors | Creating Convergence for LPs & Emerging Managers

    9,319 followers

    Taking a 'fund-of-funds approach' is the secret sauce for LPs. As data from Preqin shows: Venture Capital Fund of Funds can generate up to 3.5x - 5.5x multiples over ~10 years, which is the timeframe fund returns truly start to mature. Establishing a portfolio of highly curated venture funds does not only prove to generate high returns, it is also a more diversified, more de-risked, and less time-intensive approach to venture. However, I would not stop here. If you consider the fact that emerging funds (Funds 1-3) are proving to outperform larger funds, a fund-of-funds approach, focused on Emerging Managers, becomes even more powerful. As Kyle Thorpe showed in his report with Pattern Ventures, funds sized $0-50M are 1.4x, 3.0x, and 12.0x more likely to generate a 5x+ outcome than funds sized $50-200M, $200-500M, and $500M-$1BN respectively. The probability of generating top-quartile venture returns is now not only higher because you diversify across several funds, but accessing smaller funds additionaly increases the probability of achieving outlier returns. The problem for LPs to consider is: accessing the best-in-class emerging managers is challenging and conducting due diligence on Emerging Managers is a craft the requires time and refinement.

  • View profile for Jurrien Timmer

    Director of Global Macro at Fidelity Investments

    74,770 followers

    With the debt dynamic worsening around the world, and central banks no longer funding that debt (at least for now), the direction of the term premium for bonds remains a question mark. With the correlation between stocks and bonds now positive, what role do bonds play in a diversified portfolio? There are certainly reasons to own them: real yields are now positive and the math of owning bonds is far better now than it was a few years ago. But since 2022 they have not provided the relative balance that the 60/40 paradigm had generally provided since the late 1990’s. If we look at the distribution of risk (annualized volatility) and return, we see that a 60/40 index (60% S&P 500, 40% Bloomberg Agg.) appears to have delivered the goods from 1950 through 2024.. A 9% CAGR against a 9% vol is nothing to complain about. But in recent years the correlation between stocks and bonds has inverted, so bonds are no longer a port in the storm, even if they are now a viable competitive asset class. So perhaps we can look to other asset classes for competitive Sharpe ratios, while also providing some potential offset in case equities suffer a drawdown. Per the Sharpe Ratios chart below, alts may be able to provide this. Alternatives like hedged equity and managed futures (and even commodities and gold), although less liquid, have historically delivered superior Share ratios while also being uncorrelated to equities. One way to illustrate this evolution form bonds to alts is to view the risk-return chart for the 1998-2020 period, when stock/bond correlations where negative. You can see that from the “clear” dots below, which depict negative correlations. Bonds clearly played that role, offering competitive returns, modest volatility, and relative balance. Since 2020, however, that regime has changed. Now it’s the alts that may be able to provide at least an uncorrelated return, while offering similar performance and vol characteristics. Although, alts are not always liquid, and correlations can change, especially when it comes to commodities. And gold and commodities have also been competitive from both the risk and reward side, while also producing uncorrelated returns. A new structural regime calls for a fresh way to consider a 60/40 portfolio. Bonds still play a role, but they are no longer the primary diversification anchor. This is where alts and commodities could potentially play a role.

  • View profile for David Haarmeyer

    Alternative Investments Content & Messaging Expert

    11,886 followers

    One of Silicon Valley’s most prominent venture capital firms, Lightspeed Venture Partners ($25bn in AUM), has approached investors about selling a portfolio of 10 holdings it values at roughly $1bn through a continuation fund. “We think VCs can’t just use the excuse that the IPO window is closed, they need to take a page out of the private equity playbook and build more consistent liquidity that LPs can count on,” said Michael Romano, chief business officer at Lightspeed. Lightspeed used the secondary market to buy and sell stakes in start-ups last year. The secondary market was “a critical component to generating liquidity”, Romano said. Insight Partners has also raised a continuation fund, while New Enterprise Associates, a venture investor with $25bn in AUM, had been talking to LPs about launching its own continuation fund. “If you have poor DPI you’re dead . . . you aren’t going to raise a nickel,” one partner at another multibillion-dollar US venture firm said. Continuation funds are a way for firms to create liquidity “without [VCs] having to face the market for a proper change in control and valuation”.

  • View profile for Brian Wolfe

    Managing Partner at Funded Ventures | Retired Partner at Kirkland & Ellis | Private Equity Professor

    11,376 followers

    According to a recent report by Jefferies, continuation funds represented a record 19% of all PE asset sales in the first half of 2025, a 60% increase from the same period last year. As traditional exit routes like IPOs and strategic sales remain limited, CVs are becoming a "go-to" strategy for liquidity, allowing GPs to sell assets from one fund to another they also manage, offering existing LPs the choice to roll over or cash out. https://lnkd.in/ga53G8_J

  • View profile for Stephanie A. Rieben-de Roquefeuil

    Co-Founder/CEO @Diadem Capital | VC Investor | LP | Venture Deal Flow (Venture Capital & Venture Debt) | $7B+ Raised | Money 20/20 USA RiseUp (2023 Alumna + 2024 Mentor)

    21,011 followers

    The latest JPMorgan Private Bank Global Family Office Report reveals a significant trend: family offices are moving away from the stock market and diversifying into alternative investments. With 46% of their portfolios allocated to alternatives like private equity, real estate, venture capital, hedge funds, and private credit, these offices are aiming for higher returns and reduced volatility. This shift isn’t just a minor adjustment—it’s a strategic move by family offices, especially in the U.S., where the concentration of alternatives is even higher. Large American family offices with over $500 million in assets have more than 49% invested in alternatives. Why the move? Family offices, known for their long-term investment horizons, leverage alternative investments' benefits. These assets offer more stable valuation changes compared to the volatile swings of public stocks. This long-term approach allows family offices to capture the "liquidity premium" and generate higher returns over time. The report also highlights the entrepreneurial spirit driving family offices. Many founders, having sold businesses and amassed substantial wealth, are now seeking ownership stakes in private companies. They’re leveraging their experience to fuel growth in these ventures, making them valuable partners for companies seeking strategic guidance and investment. #FamilyOffice #AlternativeInvestments #InvestmentTrends #WealthManagement

  • View profile for Sam Klatt, CFA

    Chief Investment Officer at 10 East

    8,070 followers

    Here's a sneak peek into our current vertical-specific focus in advance of our Market Outlook for 2024: Private Equity – target return >25%. Focus on niche lower-middle market strategies with specialized execution capabilities in lesser competitive markets. Emphasis on sectors with cyclical insulation (i.e., mission critical services). Larger-scale funds with considerable capital deployment in 2020-2022 vintages may reel from lagged valuation marks.     Private Credit – target return >12%. Focus on differentiated exposures, senior in capital stack, backed by hard assets with positive cash flow. Crowding-in of private credit may dilute returns following the past decade’s yield famine.    Venture Capital – target return >30%. Focus on seed/pre-seed and one-off exposures. Generally, expect TVPI to gradually mean revert—excessive capital deployment at market peak in 2021 has led to poor vintage diversification. Zombie companies = Zombie VCs.     Real Estate – target return >20%. Focus on residential and special situations with a healthy unleveraged yield. Select distressed pockets are also attractive. The ‘when rates go down’ narrative is hope, not a strategy—avoid exposures underpinned by this bet.  As an aside, investors should not underestimate the resource drain of underperforming investments—it’s critical to assess the impact of legacy assets on the investment partner’s go-forward strategy.   What sectors/sub-sectors pique your interest? 

  • View profile for Mudassir Mustafa

    AI Native DevOps Agent | 10x DevOps & Platform Engineering Teams

    10,017 followers

    In my experience hosting VCs and Founders at Prodcircle, I've noticed a growing interest in continuation funds, especially given the current market conditions. Continuation funds are becoming a really important tool for fund managers. They serve as an effective strategy for holding onto valuable assets or portfolios that show clear potential for further growth. These funds allow managers to extend the investment horizon for their best-performing assets, which can be particularly beneficial when exit opportunities like IPOs or M&As are not favorable. One of the key benefits of continuation funds is the liquidity they offer in uncertain markets. This liquidity is crucial for both fund managers and investors. In situations where assets are hard to price and managers of closed-ended funds are facing a challenging choice at the end of their investment horizon, continuation funds provide a flexible option. They enable existing investors to either exit by selling their stakes to new investors or to roll over their interests into the new fund, thereby maintaining their investment in promising ventures. Continuation funds can be structured to align closely with the interests of both the managers and investors. They offer the prospect of ongoing management fees and further carry or performance fees. This alignment is beneficial as it can lead to a more focused and dedicated management approach, potentially increasing the value of the assets in the fund. These examples demonstrate the strategic use of continuation funds by well-known firms to manage their prized assets effectively. Interested in startups and venture capital? Check my free newsletter for more insights: https://lnkd.in/dBjV_4w9