Optimal Diversification = Stocks Hedge Funds Private Equity Venture Capital Real Assets Digital Assets Cash & Credit

Briefly open to a random page in Meditations: “It is a shame for the soul to be first to give way in this life, when your body does not give way. Take care that you are not a Caesar. Keep yourself then simple, good, pure, serious, free from affectation, kind, affectionate, worshipper of gods.”

Recently, one of our managers encountered a structural change that impaired his strategy. Rather than hope for the best or keep collecting fees, he immediately informed investors, offered the option to redeem, spent a month exploring potential solutions, and when none emerged, returned everyone’s capital. Ironically, his willingness to admit the edge was gone only increased our trust in him. That’s the kind of manager I’d back again if and when he restarts trading.

The most important quality in an investment manager isn’t investing talent—it’s integrity. Markets evolve, edges come and go, and strategies fall in and out of favor. A manager with integrity will tell you the truth when that happens.

Life should be enjoyed without feeling anxiety about whether the market will go up or down. The best way to achieve this is through multimanager, cross asset-class portfolio diversification.

The multi-asset investor does not loose sleep or feel anxious about being under or overallocated to any one source of risk or return. I used to feel anxiety when only I managed my portfolio. Now I’m spread across 30 managers across all major asset classes, and the peace of mind and sense of calm is so valuable.

A multi-manager, cross-asset-class approach allows you to be both a mile wide and a mile deep.

“Years to go” on the AI buildout does not mean buy and close your eyes for years. These market conditions demand intense focus and active approach to managing risk and return.

The diversification benefit of adding a non-correlated hedge fund manager to a portfolio is far greater than adding another stock. It’s not even close.

Stock pickers market

What happens when markets top into a prolonged bear market? Long only strategies watch and wait for sunshine. Long/short strategies is business as usual and, in certain cases, it actually makes for even better investing conditions.

The most sustainable path to compounding long-term capital is to hold a diversified portfolio of domestic stocks, international stocks, commodities, hedge funds, venture capital, private equity, and real assets. Can even throw in some Bitcoin and bonds for good measure. And at least 25% allocation to "market-insensitive" assets such as hedge funds, reinsurance, bonds, cash, etc. It's unfortunate how few investment solutions exist that combine all these asset categories into one portfolio.

These types of market environments are good for “half hedged” style of investing ($1 short for every $2 long). Lots of mark-ups and mark-downs are happening simultaneously. Just last week we found a solid AI short trading at 80x 2030 sales.. but we also have AI-oriented longs working in unison. More longs than shorts is also nice because longs tend to be far more asymmetric.

The sharper the pump, the fatter the left tail.

The universe of available investment opportunities is far more expansive if you can embrace paying fees to specialized external managers. Compare an institutional multi-manager portfolio to a conventional stocks-only account, the former is in a totally different league. Caliber and quality of the diversification is day and night. Specialized manager charging me 1.5 / 20 for a low correlation, solid expected returns in some niche substrategy like nuclear energy or event-driven Japan? Sign me up.