Aswath, when you were on CNBC on February 19, 2021, you said Bitcoin is not an investment and not an asset class. And you were right! Why the change of heart? Certainly, the fact that Bitcoin is still trading, even at a higher price, doesn't miraculously turn it into an investment. It was, and still is, pure speculation. Not that anything is wrong with speculation. But it is not an investment, and it doesn't belong to a portfolio, as long as a portfolio is still what we always thought it was: a collection of investments.
We are very disappointed. Your writings have helped us and shaped our thinking so much over the years. You were one of the very few who actually cared about definitions, took a principled approach and questioned everything. You impacted many with those qualities, us included, in a very positive way.
If you don't want to fight the good fight anymore, that's fine, you gave so much to the world of finance and you don't owe anybody anything. But future generations are still watching and we don't believe taking the exact opposite position four years later without a material change in facts is consistent with your brand, intellect and curiosity.
Alternative investments often fail to deliver on their promises of high returns and low risk, relying more on marketing spin and flawed metrics than on fundamental value creation.
My adviser has sent me two fixed income options for cash. They are closed end funds (!), from Cliffwater, CCLFX and CELFX. They deal in corporate loans, which they cite for their floating rates and high yields, Since intermediate bond mutual funds which index to Bloomberg Aggregate find it very difficult to provide either a ballast to equity or yield, what is the 60/40 or the 70/30 investor to do? Cliffwater funds redeem only quarterly, and are not obligated to redeem all shares offered. As far as I can tell the expense ratios are north of 3%. If inflation is 2% that's a real yield of 1% for limited liquidity in addition to being in risky BB or lower credits. Shouldn't the SEC enhance the disclosures and the regulation on these products for individual investors. Enjoyed using your valuation text in the CFA program and in the APC program at NYU eons ago.
The problem with alternative investments is that there is a motivation to sell those products to collect more fees. I have had a really big interest and read a lot about alternatives and it is not all black and white, but a lot depends on faith on correlations working a certain way.
Currently, my only alternative investments are in real estate, and I am targeting 15% returns. They are very illiquid so the correlation matrix will not matter to me unless we have a drawdown that last for 1 or 2 years, but that is ok, I accept the illiquidity for the high returns.
I’ve been investing for 35 years, and I’ve seen every version of this pitch: “more alpha, less correlation, new frontier.”
What actually shows up in portfolios? Higher fees, lower liquidity, and no accountability when the “alpha” disappears.
I’ve backed off almost every alt strategy at this point — not because I’m against innovation, but because the tools and disclosures just aren’t built for real investors (especially individuals).
Damodaran nails it here: once the excess returns are arbitraged away and the opacity remains, what’s left?
These days, I focus on style-aligned investing and building tools that help people make better decisions without the smoke and mirrors.
Ajay — I don’t really mess with AQR / long-short products like QLENX, so I don’t have a strong view there. Between the fees, complexity, and regime risk, I’d rather keep my own money in plain equity and simple, transparent strategies.
Aswath, when you were on CNBC on February 19, 2021, you said Bitcoin is not an investment and not an asset class. And you were right! Why the change of heart? Certainly, the fact that Bitcoin is still trading, even at a higher price, doesn't miraculously turn it into an investment. It was, and still is, pure speculation. Not that anything is wrong with speculation. But it is not an investment, and it doesn't belong to a portfolio, as long as a portfolio is still what we always thought it was: a collection of investments.
We are very disappointed. Your writings have helped us and shaped our thinking so much over the years. You were one of the very few who actually cared about definitions, took a principled approach and questioned everything. You impacted many with those qualities, us included, in a very positive way.
If you don't want to fight the good fight anymore, that's fine, you gave so much to the world of finance and you don't owe anybody anything. But future generations are still watching and we don't believe taking the exact opposite position four years later without a material change in facts is consistent with your brand, intellect and curiosity.
Thank you.
New Finance Institute
Thank you, great coverage as always!
Have a great day!
I am not a student, but learn more from your video.
Alternative investments often fail to deliver on their promises of high returns and low risk, relying more on marketing spin and flawed metrics than on fundamental value creation.
transparency, honest benchmarking, and disciplined investing
My adviser has sent me two fixed income options for cash. They are closed end funds (!), from Cliffwater, CCLFX and CELFX. They deal in corporate loans, which they cite for their floating rates and high yields, Since intermediate bond mutual funds which index to Bloomberg Aggregate find it very difficult to provide either a ballast to equity or yield, what is the 60/40 or the 70/30 investor to do? Cliffwater funds redeem only quarterly, and are not obligated to redeem all shares offered. As far as I can tell the expense ratios are north of 3%. If inflation is 2% that's a real yield of 1% for limited liquidity in addition to being in risky BB or lower credits. Shouldn't the SEC enhance the disclosures and the regulation on these products for individual investors. Enjoyed using your valuation text in the CFA program and in the APC program at NYU eons ago.
The problem with alternative investments is that there is a motivation to sell those products to collect more fees. I have had a really big interest and read a lot about alternatives and it is not all black and white, but a lot depends on faith on correlations working a certain way.
Currently, my only alternative investments are in real estate, and I am targeting 15% returns. They are very illiquid so the correlation matrix will not matter to me unless we have a drawdown that last for 1 or 2 years, but that is ok, I accept the illiquidity for the high returns.
Thanks again Ashwath
Amazing article, in depth explanations. Subscribed instantly. Here and on LinkedIn ! Thank you Aswath.
I’ve been investing for 35 years, and I’ve seen every version of this pitch: “more alpha, less correlation, new frontier.”
What actually shows up in portfolios? Higher fees, lower liquidity, and no accountability when the “alpha” disappears.
I’ve backed off almost every alt strategy at this point — not because I’m against innovation, but because the tools and disclosures just aren’t built for real investors (especially individuals).
Damodaran nails it here: once the excess returns are arbitraged away and the opacity remains, what’s left?
These days, I focus on style-aligned investing and building tools that help people make better decisions without the smoke and mirrors.
Any comments on AQR funds like QLENX. They seem to have superior risk ratios to plain vanilla index funds.
Ajay — I don’t really mess with AQR / long-short products like QLENX, so I don’t have a strong view there. Between the fees, complexity, and regime risk, I’d rather keep my own money in plain equity and simple, transparent strategies.