Aswath Damodaran

Aswath Damodaran

962,000 subscribers

⏱ 👁 32,433 views

Alternative Investing: Promise and Performance!

Video Overview & Insights

Much of standard investing advice and teaching is directed at investors who are long-only in publicly traded stocks and bonds, with differences in market views, risk aversion and investment philosophy manifesting in allocation (stock-bond mix) and in stock/bond selection. That may suffice for most investors, but it does ignore vast swaths of the investment universe including shorting individual assets or markets (hedge funds, derivative strategies), privately owned businesses (venture capital, private equity and private credit) and asset/investment classes that are lightly or not traded (portions of real estate, collectibles like gold, art and even cryptos). In the last two decades these "alternative" investments have been marketed to institutional investors on the promise that they will deliver better risk/return tradeoffs, because of their lower correlation with traded stocks & bonds and their potential to create alpha (because market mistakes are more likely to persist in alternative investment markets and superior managers will find them). That promise, while looking good on paper, has largely not been delivered in practice and we look af four reasons - understated correlations, illiquidity and lack of transparency, fading alphas in VC and PE and high costs. I look at guidelines that individual and institutional investors who seek to add alternative investments should follow to avoid the traps.

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Professor, is a listed private equity ETF a good proxy for getting PE exposure?

— @mf2825

Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/Alternatives.pdf

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Hi Aswath, I greatly appreciate your videos, I am an African, but my love for finance makes me to watch and learn from you almost "religiously". Someday, I will get to shake your hand 😁.

Thank you.

— @ateghafuh2964

More User Perspectives

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Thank you professor!!!

@PRINCIPLES_7

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Thank you Prof. Damodaran. Are you warming up to the idea that bitcoin might have its own part in a portfolio?

@simon90879

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very crisp and clear presentation

@anindadatta164

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Is there any asset class that is truly uncorrelated?

@jacksonrichards4127

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Great session, Professor! Got superb clarity on the alternatives.

@PrathamRathore_047

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Great video. The reasons why alternative investments are likely not boosting sharpe ratios are spot on.

@SpencerKimber

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Fantastic explanation and analysis. Ultimately you provide a lot more clarity that many folks don’t provide. Appreciate the final guidance points at the end.

@roshycoachy

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Thank you for your videos... Bitcoin will still dominate 2025, So invest a right balance. We’re inching closer to record-breaking highs, and all signs point to something much bigger on the horizon. If Bitcoin follows the same patterns it followed in the last cycles, we will have a 200k Bitcoin by the end of 2025. This could mean great things for people looking to invest, suggesting now might be a good time to get involved before it jumps even higher. It's an exciting moment that could change the game in general...managed to grow a nest egg of around 100k to a decent 7 figures. At the heart of this evolution is Seren Wintersun, whose deep understanding of both cryptocurrency and traditional trading has been instrumental. The question isn’t if Bitcoin will climb higher, it’s who will be ready when it does.

@ThatKansasLady

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Classic Aswath Damodaran

@raghavbinnani6473

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Thank you professor for the session. I was skeptical about this back when I was trying to construct and backtest my risk parity portfolio. It all comes down to how they hold up during crisis.

@mattew446

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Thanks for the informative video. I've never seen anyone do it better than you. I'm actually investing in stocks and cryptocurrencies, and it's been very profitable. I make $65,000 every week, even though I barely trade. Thanks Timo Mack for the constant updates on the financial market!!!......!🔥..🔥

@stiljanvrapi5410

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I don't know if I would consider 2022 as a year to look at the whole alternative investment sector. I also think Gold and Crypto should be looked at seperately from VC and PE. Gold and Cypto are usually hedges from the market and, have virtually no fees, and are virtually as liquid as stocks and bonds. VC and PE are all over the place . That being said, I absolutely love Prof. Damodaran!!!!

Ok, he does point that out during his conclusion to be fair.

@discreplayboss

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I tried this in real life. Now I have less money and more character.

@FromCentstoSatoshi

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Thank you.

@devdhamija7585

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Another awesome video, thank you professor.

I think VC funds are allowing startups to stay private for longer and wait before IPOing, especially as they are much bigger than a decade ago. This may mean that the early years of fast and double digit compounding are now increasingly inaccessible to public market investors.

@arkiki2717

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Aswath Damodaran's termination can't come fast enough 😂

@TradingJournal12

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YESSS LOVE YOU MAN. THE LEGEND IS BACK

@datguypsycho2026

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Aswath has the best vibes. Even if i didn't care about investing I just like to listen to him :) Thanks for all you do!

@HowdyDoScoobyDo

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