An institutional investor has written a rare insight into institutional portfolio management and why the simple conventional approach outshines complex, alternative models. Alternative investments including hedge funds and private equity have a certain allure according to the author, but their benefits over conventional investing do not outweigh the risks involved. The author outlines three key reasons why institutional investors have shunned conventional investing for alternative investments. These are that alternative investments are a much more interesting way to allocate capital, the belief that their job is to search the market for outperformance and the assumption that complex investments are better. Therefore, the author argues that too few portfolio managers see the benefits of simplicity, unlike alternative investments where which research has shown they are likely to disappoint. (VIEW LINK)
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