Dynamics of Publicly-Traded Markets
- Attractive because they are liquid and still provide adequate returns on invested capital over the long-run.
- Relatively Efficient – extremely difficult to identify underpriced assets.
- High-level of participants and competition makes it tough to beat the market.
- Efficiency drives better pricing, limiting an investor’s ability to achieve outsized gains.
- Very difficult to distinguish one fund from the next… public market investing is very commoditized.
- By treating public markets like a commodity we put our focus in the right place – keeping investment costs low and systematically analyzing risk and return.
Dynamics of Private/Alternative Markets
- Lower-level of participants, asymmetric information, and lack of competition inhibit the formation of efficient markets.
- More inefficiencies exist – easier to find under-priced assets.
- Inefficiency means certain assets are underpriced, giving savvy investors an edge.
- Varied asset classes provide true diversification, even in times of extreme financial distress.
- Investing in real assets (private companies, timberland, apartment communities, etc.) and removing all the “handling fees” means that investors have a more diversified portfolio with the possibility of achieving better performance.