The Changing Landscape of Alternative Investments

In the latter half of the 20th century, institutional capital and ultra-high-net-worth families began seriously investing in alternatives, especially during the 1970s and 1980s. This trend was fueled by the need for diversified portfolios amidst growing market volatility and the desire for better returns in a low-interest-rate environment.

Regulatory changes like the Employee Retirement Income Security Act (ERISA) of 1974 in the United States further encouraged diversification in pension fund management, prompting institutions to explore alternative investments to meet their long-term objectives while managing risks.

David Swensen, Yale University’s Chief Investment Officer, played a pivotal role in this shift during the 1980s. He championed diversification and a long-term outlook, advocating for significant allocations to alternative investments in the Yale Endowment Investment Model. Swensen recognized the potential of alternative asset classes like private equity, real estate, and hedge funds to deliver higher returns and diversification benefits.

Historically, alternative investments required substantial capital commitments, making them inaccessible to many individual investors. Moreover, the complexity of these investments, involving intricate financial analysis, legal considerations, and valuation assessments, posed challenges for individual investors lacking expertise or access to experienced advisors.

While alternative managers have recently lowered their minimum investment requirements to accommodate retail investors, the complexities persist. However, the team at LoneTree possesses the background and expertise to guide clients through these intricate investments, acting as fiduciaries aligned with their overall goals and investment time horizons.

If you're interested in learning more about how alternatives can complement your portfolios, please This email address is being protected from spambots. You need JavaScript enabled to view it. to the LoneTree team.