Aswath Damodaran: The Uncertain Payoff from Alternative Investments
Professor Aswath Damodaran’s latest analysis challenges the conventional wisdom surrounding alternative investments, revealing significant gaps between marketing promises and actual performance. Aswath examines how institutional and individual investors have increasingly embraced alternatives like hedge funds, private equity, and venture capital, often with disappointing results despite decades of compelling sales pitches.
Alternative investments have gained mainstream acceptance over the past two decades, moving beyond their traditional institutional confines to target individual investors. The core argument for these investments rests on two pillars: their supposedly low correlation with traditional stocks and bonds, and their potential to generate excess returns through superior management and market inefficiencies. However, Damodaran’s analysis suggests these benefits may be largely illusory when subjected to rigorous scrutiny.
