Investment Diversification Techniques

Private equity has discovered a new miracle cure for its cash drought: more financial engineering! 🥴 A revealing article on Bloomberg a few days ago caught my attention. On the latest financial engineering shenanigans of an industry under siege from disillusioned investors. With exits stalled and cash distributions to investors dropping from 29% of NAV a decade ago to just 11% last year (Bain & Company), firms are turning to increasingly complex tactics to keep capital flowing. ▶️ Borrowing against commitments to continuation funds — a way to "generate more favorable returns for would-be buyers," even if it adds risk. ▶️ Subscription lines and NAV loans — where "you have to think about adding leverage on a portfolio of levered deals," as Jeffrey Miller, CFA of Pantheon Ventures put it. ▶️ Collateralized fund obligations — slicing and selling fund stakes, with GPs keeping the riskiest pieces. ▶️ "Quick-turn" financing pitches — Goldman Sachs offers structures that move fund stakes into special-purpose vehicles to "avoid crystallizing losses." As Andrea Auerbach of Cambridge Associates summed up: "All sides of the industry are looking for liquidity in different ways. The hunt is on." But the hunt comes with consequences. Highly concentrated continuation vehicles mean little margin for error. And have you heard about the newfangled CV-squared concoctions? (A blast 💥 from the past for me, personally, as a former $2bn CDO-squared manager.) Rising interest costs already exceed hurdle rates in some cases, forcing more "fractious negotiations" between managers and investors. Some boards reject these deals outright — not for lack of creativity, but because they’re too complex to explain and too expensive to justify (interest rates can soar to 2️⃣0️⃣% on less-liquid portfolios). Private equity was once a "buy/improve/sell" business. Increasingly, it’s a "buy/hold/leverage-engineer" business. 🖐️ Is it just me who is wondering whether today’s liquidity solutions are truly protecting capital — or simply postponing the reckoning? Based on reporting by Preeti Singh, Allison McNeely, Marion Halftermeyer and Laura Benitez (+++Opinions are my own. Not investment advice. Do your own research.+++) Enjoying my posts? Tap the 🔔 next to my photo and set it to 'All' and you'll be notified when I post. 💸

I’ve invested in 255 Y Combinator companies. Here is why and how: In 2017, a couple of years after Earbits was acquired, my co-founder and I wanted to start investing in other startups. As YC alumni, we have early access to YC deals, which arguably offers the best deal flow an investor could hope for. However, identifying unicorns before they turn into unicorns is nearly impossible. So instead of cherry-picking, we decided to take a different approach: index investing in YC companies. Our thesis was that by building a diversified portfolio, we would be able to produce better results while lowering risk. So we put the theory to the test. Our first fund was fairly small, and we invested in 19 companies from the S17 batch. Within a few years, two of the companies turned into unicorns, and another was acquired by the NY Times. So, we did it again in W21. This time, we invested in 50 companies. To our delight, the second fund performed as well as the first. Both funds are outperforming 90% of benchmarked funds from their respective vintages. To date, we’ve invested in 255 companies across 5 batches. We take great pleasure in writing easy and often first checks to exceptional founders. ____ 𝐓𝐰𝐢𝐜𝐞 𝐚 𝐲𝐞𝐚𝐫 𝐰𝐞 𝐢𝐧𝐝𝐞𝐱 𝐢𝐧𝐯𝐞𝐬𝐭 𝐢𝐧 𝐘 𝐂𝐨𝐦𝐛𝐢𝐧𝐚𝐭𝐨𝐫 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬. 𝐖𝐞 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐝𝐢𝐯𝐞𝐫𝐬𝐢𝐟𝐢𝐞𝐝 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨𝐬 𝐰𝐢𝐧. 𝐃𝐌 𝐦𝐞 𝐢𝐟 𝐲𝐨𝐮’𝐝 𝐥𝐢𝐤𝐞 𝐭𝐨 𝐥𝐞𝐚𝐫𝐧 𝐦𝐨𝐫𝐞. #founder #entrepreneur #startup #venturecapital #vc

I am very happy to share insights from my recent op-ed in the Financial Times. Emerging markets have often been viewed as risky, but new data from the Global Emerging Markets Risk Database Consortium paints a different picture. With comparable default rates and superior recovery rates, investing in emerging markets offers resilience and potential. The statistics, spanning 30 years of lending, show that the risks in emerging markets compare favorably with other asset classes. Additionally, the portfolio diversification they offer proves beneficial during global stress periods. As a co-founder and major contributor to GEMs, IFC is committed to providing crucial data to help investors make informed decisions about emerging markets. Reallocating just 1% of global assets each year could significantly impact growth and development in these countries. Read more: http://wrld.bg/PWRb50Ro0tq The World Bank IFC - International Finance Corporation

Investment Opportunities in Climate Adaptation and Resilience 🌎 Climate change is intensifying physical risks across regions and sectors, placing climate adaptation and resilience (A&R) at the center of global strategic priorities. While mitigation addresses emissions, A&R solutions tackle the immediate and long-term risks to infrastructure, economies, and communities. Investment in Climate A&R remains at an early stage despite its scale and urgency. The BCG and Temasek report projects global A&R financing needs of $0.5 trillion to $1.3 trillion per year by 2030. This presents a significant opportunity for private capital to drive both financial returns and systemic resilience. The Climate Adaptation & Resilience Investment Opportunities Map provides a framework to assess where capital can be most effectively deployed. It structures opportunities into seven impact themes and offers a granular view of subsectors and solutions across industries. Investors will find diverse entry points—from early-stage ventures focusing on pure-play A&R innovations to established industrial players integrating resilience solutions into broader portfolios. This dual landscape enables a mix of venture, growth, and buyout strategies tailored to different risk appetites. Adaptation markets are inherently localized. Flood defense strategies, water efficiency technologies, and agricultural resilience solutions vary by geography, creating fragmented but scalable market opportunities that respond to specific climate risks and regulatory frameworks. The report highlights the importance of co-benefits. Nature-based solutions, for example, deliver protective functions while enhancing biodiversity and ecological health. At the same time, material-intensive interventions require careful scrutiny to balance resilience gains with environmental impacts. To capitalize on these trends, investors will need to navigate sectors where regulation, insurance incentives, and risk disclosure frameworks are evolving rapidly. Competitive advantages will accrue to those with deep technical expertise and the ability to scale proven solutions across markets. The Climate Adaptation & Resilience Investment Map identifies seven key impact themes: - Food Resilience - Infrastructure Resilience - Health Resilience - Business and Community Resilience - Water Resilience - Energy Resilience - Biodiversity Resilience Climate adaptation is shaping a new investment frontier, where value creation is tied directly to long-term societal and economic stability. #sustainability #sustainable #business #esg #climatechange

For much of the post-GFC period, asset allocation benefitted from unusually supportive conditions: falling rates, ample liquidity, and reliable diversification between stocks and bonds. We believe that environment has changed as cross-asset dispersion has narrowed, starting valuations are less forgiving, and traditional diversification has become less reliable. In this Regime Change environment, incremental performance is driven less by simply owning the ‘right’ asset classes and more by how portfolios are constructed, including sizing, sequencing, and diversification across return drivers, as well as manager selection. To help investors navigate this backdrop, I partnered with Christian Olinger and David McNellis, alongside members of KKR’s Global Macro & Asset Allocation and Solutions teams, to publish updated Capital Market Assumptions across Public and Private Markets over 5-, 10-, and 20-year horizons. Three conclusions stand out: 1. The opportunity set is narrowing. The gap between the best- and worst-performing asset classes has compressed to ~7.4%, down from ~9% several years ago, making portfolio construction and manager selection more important than broad asset class selection alone. 2. Starting points matter more. Public market valuations remain elevated, credit spreads are tight, raising the bar on selectivity and disciplined risk-taking. 3. Resilience matters more. In a regime of higher-trend inflation, persistent fiscal deficits, and elevated geopolitical risk, quality is priced at only a modest premium. Against this backdrop, Private Markets are becoming more central as sources of return, diversification, and inflation resilience. So, our bottom line is that frameworks matter more than forecasts. We at KKR believe investors should rely on forward-looking assumptions around returns, volatility, correlations, and manager dispersion to build portfolios designed for long-term resilience, not precision. Read more at https://go.kkr.com/4a3dUdE

In our latest Global Strategy Paper, "Investing in Everything, Everywhere, All at Once”, we map out the 'World Portfolio'—the sum of all investable assets globally, which we estimate at roughly US$250 trillion (or 200% of world GDP). The World Portfolio acts as a de facto benchmark for global investors, and its composition reveals powerful macro trends. Currently, we see a heavy dominance of US assets in both equities and bonds, a rising weight of equities relative to bonds since the GFC (but not at Tech Bubble levels yet), and growth in alternatives. These are not just abstract trends; they are directly reflected in how investors are allocating their capital today. Why does this matter? Simply following this benchmark is not always a good idea. Our analysis shows that the World Portfolio has seldom been optimal and its performance varies materially with structural macro regimes. Its current concentration in US assets, while a tailwind in recent years, now presents significant risks from a diversification and valuation standpoint. This report provides a framework for investors to actively improve upon this global benchmark. We offer strategies for: 1. Strategic Tilting: Actively managing the equity/bond/Gold mix to navigate different economic environments. 2. Managing US Dominance: Assessing the sustainability of US outperformance and managing the associated FX risks for non-US investors. 3. Broader Diversification: Harvesting benefits from smaller assets and alternatives that are often missed by value-weighted benchmarks. In today's complex market, understanding the limitations of global benchmarks is crucial for effective strategic asset allocation. #assetallocation #gsmacro Read the report here: https://lnkd.in/eGxqZizt

𝗛𝗲𝗿𝗲’𝘀 𝗺𝘆 𝗼𝘂𝘁𝗹𝗼𝗼𝗸 𝗮𝘀 𝗮 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝗹𝗲𝗮𝗱𝗲𝗿 𝗼𝗻 𝗘𝗠𝗗𝗘 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝗶𝗻 𝟮𝟬𝟮𝟲: 𝗥𝗲𝘀𝗶𝗹𝗶𝗲𝗻𝘁 𝗯𝘂𝘁 𝗖𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝗱 If you follow the headlines, you would be forgiven for thinking the energy transition in emerging markets is stalling. • US public climate finance has pulled back sharply. • Geopolitics is fragmenting capital flows. • Climate impacts are becoming more disruptive. But that story misses what is actually happening on the ground. 𝗛𝗲𝗿𝗲 𝗶𝘀 𝘄𝗵𝗮𝘁 𝘁𝗵𝗲 𝗱𝗮𝘁𝗮 𝘀𝗵𝗼𝘄. • Global energy transition investment still grew by 10%+ year-on-year, despite political headwinds. • Clean technology costs continue to plummet, driven by manufacturing scale. Changes are in where the funding comes from, how risk is measured, and which regions are benefiting. 𝗣𝘂𝗯𝗹𝗶𝗰 𝗮𝗻𝗱 𝗰𝗼𝗻𝗰𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝘂𝘀𝗲𝗱 𝘁𝗼 𝗱𝗼 𝘁𝗵𝗿𝗲𝗲 𝗾𝘂𝗶𝗲𝘁 𝗯𝘂𝘁 𝗰𝗿𝗶𝘁𝗶𝗰𝗮𝗹 𝗷𝗼𝗯𝘀 𝗶𝗻 𝗲𝗺𝗲𝗿𝗴𝗶𝗻𝗴 𝗺𝗮𝗿𝗸𝗲𝘁𝘀: – fund early project development – take first-loss positions – anchor blended finance structures As that layer retreats, projects may fail not because they are uneconomic, but because they are unfinanceable under current risk frameworks. 𝗔𝘁 𝘁𝗵𝗲 𝘀𝗮𝗺𝗲 𝘁𝗶𝗺𝗲, 𝗖𝗵𝗶𝗻𝗮 𝗮𝗻𝗱 𝗽𝗮𝗿𝘁𝘀 𝗼𝗳 𝗦𝗼𝘂𝘁𝗵𝗲𝗮𝘀𝘁 𝗔𝘀𝗶𝗮 𝗮𝗿𝗲 𝗲𝘅𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝘁𝗵𝗲 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 𝗮𝘁 𝘀𝗰𝗮𝗹𝗲. Clean tech is cheaper than ever. In many emerging markets, renewables are now the cheapest form of new power generation, full stop. But cheaper technology does not automatically mean affordable finance. 𝗟𝗲𝘀𝘀 𝘁𝗵𝗮𝗻 𝟮𝟱% 𝗼𝗳 𝗴𝗹𝗼𝗯𝗮𝗹 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝗿𝗲𝗮𝗰𝗵𝗲𝘀 𝗲𝗺𝗲𝗿𝗴𝗶𝗻𝗴 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗼𝘂𝘁𝘀𝗶𝗱𝗲 𝗖𝗵𝗶𝗻𝗮. In some cases, financing costs are hundreds of basis points higher than for identical projects in developed economies. This is why national transition plans and domestic policy frameworks matter more than ever. Not as signaling devices, but as coordination tools that steer local banks, pension funds, and development institutions toward real investment pipelines. 𝗘𝗺𝗲𝗿𝗴𝗶𝗻𝗴 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗼𝘂𝘁𝘀𝗶𝗱𝗲 𝗖𝗵𝗶𝗻𝗮 𝗻𝗲𝗲𝗱 $𝟮–𝟯 𝘁𝗿𝗶𝗹𝗹𝗶𝗼𝗻 𝗯𝘆 𝟮𝟬𝟯𝟬 𝗳𝗼𝗿 𝘁𝗵𝗲 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻.  That will not be mobilized through ambition alone. The next phase of the transition will reward those who understand systems, not just capital flows. That is where the real work now lies. 𝗚𝗲𝘁 𝘁𝗵𝗲 𝗳𝘂𝗹𝗹 𝗮𝗻𝗮𝗹𝘆𝘀𝗶𝘀 𝗶𝗻 𝗺𝘆 𝘄𝗲𝗲𝗸𝗹𝘆 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿 (𝗶𝗻 𝗺𝘆 𝗯𝗶𝗼 𝗮𝗻𝗱 𝗯𝗲𝗹𝗼𝘄) How are you seeing transition finance changing in 2026? #climatefinance #transitionfinance #emde #emergingmarkets #investors #capital #decarbonization #renewables #cleanenergy

As we move into the second half of 2025, Standard Chartered’s H2 2025 Global Market Outlook – produced by Steve Brice, Manpreet Gill and Raymond Cheng - is a timely read as we explore the shifts we are seeing globally. The global investment landscape continues to evolve – shaped by monetary policy easing, expectations of a US soft economic landing, and continued geopolitical and economic volatility. Our latest report, themed ‘Positioning for a Weak Dollar’, provides a thoughtful perspective on what lies ahead. A few key highlights include: • A weaker USD is expected in the next 6-12 months, benefitting the EUR, JPY and GBP, as well as emerging market local currency bonds • There is a bullish outlook on global equities, especially non-US equities (e.g., Asia ex-Japan) • Potential risks of renewed tariffs and inflation mean that gold and alternative strategies could be attractive diversifiers in mitigating temporary volatility In times of uncertainty, insight is crucial. At Standard Chartered, we help our clients make informed decisions about their long-term investment portfolios, supporting them to grow, protect and pass on their wealth. Our leading wealth management expertise continues to enable our clients to explore global opportunities and navigate volatility. Check out the link in comments below for the full report 👇

Ahead of the CFA Institute's webinar on private markets next week, I wanted to share the CFA Institute Research Foundation's book, "An Introduction to Alternative Credit". This comprehensive guide, authored by industry leaders, explores the growing importance of alternative credit investments in today's market. As traditional bank lending tightened post-2008, alternative credit emerged as a crucial player, offering bespoke solutions outside the traditional fixed-income market. The book delves into various sub-asset classes like Direct Lending, Collateralized Loan Obligations, Infrastructure Debt, Trade Finance, Consumer Loans, and Venture Debt, detailing their unique characteristics, risks, and returns. Highlighting the resilience of alternative credit in volatile markets, the book's authors discuss how its customized nature can mitigate broader macroeconomic risks and offer superior risk-adjusted returns through lower volatility and correlation to other investments. For anyone looking to deepen their understanding of alternative investments, this book is a must-read. It not only covers the fundamentals but also offers expert views on opportunities within private credit. 👉 Dive into the future of finance with "An Introduction to Alternative Credit", which is attached as a PDF. #AlternativeCredit #PrivateCredit #InvestmentStrategies #CFAInstitute #CFA #FinancialMarkets #FinanceBooks #InvestmentEducation

How are Family Offices navigating global trade wars and geopolitical tensions? Family Offices globally are reshaping investment strategies in response to increased global trade tensions and geopolitical uncertainty. According to the UBS Global Family Office Report 2025, 70% of Family Offices rank global trade wars as their top investment risk, with major geopolitical conflicts (52%) and inflation (44%) also significant concerns. Over the next five years, geopolitical issues are projected to become even more critical. To manage these risks, Family Offices increasingly favor active management, selecting skilled managers to maintain stability during market volatility. About 40% prioritize active management, while 31% rely on hedge funds known for mitigating downside risks. Additionally, 27% are boosting their holdings in illiquid assets for market resilience. Precious metals have also regained popularity, now chosen by nearly 20% of Family Offices. Asset allocations have shifted notably toward developed market equities, currently averaging 29%, while developed market bonds have gained attention for their stable returns during uncertain periods. Interest in emerging markets like India and China remains cautious due to geopolitical unrest (56%) and political instability (55%). Additional concerns such as currency volatility and regulatory challenges further complicate investment decisions in these regions. Private market allocations are adjusting as well. Typically strong in private equity, Family Offices are moderately reducing their exposure from 21% to a projected 18% by 2025, driven by rising interest rates and slower exit opportunities. Regionally, investments continue to favor North America and Western Europe, while exposure to Asia-Pacific and Greater China is modestly declining, reflecting evolving perceptions of risk. Succession planning is another key area for Family Offices. While over half (53%) have formal plans, significant challenges remain in tax efficiency (64%) and preparing the next generation effectively (43%). These strategic adaptations offer broader considerations for investors of all types. How might Family Office strategies inform individual and institutional approaches to investing? Could these strategic changes reshape overall market dynamics? Most importantly, how will ongoing geopolitical developments shape future investment opportunities?