At the Money: Lessons in Allocating to Alternative Asset Classes

Entry Challenges

Navigating the world of alternative investments presents unique challenges, particularly for individuals seeking access to top-tier funds. Ted Seides emphasizes the importance of finding a good manager, as the dispersion of returns in alternatives is significantly wider than in traditional markets 1. He notes that gaining entry to these funds often requires establishing relationships and competing with well-resourced institutions like endowments and pension funds 1.

It's really hard, particularly as an individual. If you think about it, you're competing with all of those very well resourced institutions.

--- Ted Seides

Barry Ritholtz adds that many desirable funds have high minimums and long queues, making it crucial to understand one's investment goals and to start by looking at larger, established managers 1.

   

Due Diligence

Conducting thorough due diligence is vital when investing in alternative assets. Ted Seides advises starting with the fund of funds world, highlighting firms like Harborvest and Hamilton Lane as gateways to high-quality exposure 2. He stresses the importance of understanding a manager's philosophy, strategy, and past performance to ensure alignment with one's investment goals 2.

A lot of it starts with meeting the people and trying to understand what is their philosophy, what is their strategy, and how do they go about deal making.

--- Ted Seides

Barry Ritholtz underscores the need for investors to be aware of the long-term nature of these investments and to conduct due diligence to avoid underperformance 2.