Diversification Techniques

Building an Alts Strategy That Survives Market Cycles “If your alts strategy only works in bull markets, it’s not a strategy. It’s a trend.” As investors, we don’t build portfolios for the last market. We build for the next one—and the one after that. That’s why alternatives must be part of the foundation, not the frosting. In my playbook, they serve structural purposes: yield in a low-rate world, protection when volatility spikes, and uncorrelated return when the usual bets stop working. What survived 2022’s bond carnage? Private credit with tight covenants. What added ballast in 2020’s chaos? Trend-following strategies. What’s quietly compounding as public markets debate the Fed? Real assets. This isn’t market timing. It’s risk discipline. Diversification by why—not just what. We don’t know the next regime shift. But we do know this: portfolios built on lazy 60/40 thinking won’t be ready. Discipline compounds. So does conviction. #bealternative So how do you build an alts strategy that lasts? Here are five practical takeaways grounded in books like Expected Returns, Unconventional Success, and Beyond Diversification: 1. Start with Purpose, Not Product Great portfolios begin with alignment—not allocation. Before choosing a strategy, define the role: income, growth, diversification, or protection. – Ask: “What risk or problem is this solving?” – Avoid chasing style—build with intent. 2. Diversify by Driver, Not Just Label Dont' over-rely on asset labels. Focus on underlying return sources: equity beta, credit spreads, volatility premia, illiquidity, inflation. – A portfolio of 10 things that all bleed in a crisis is not diversified. – Mix return drivers, not just names. 3. Treat Liquidity as a Constraint—And an Edge Lean into illiquidity, but only when matched to cash flow needs. – Use liquidity ladders to meet redemptions. – Lock up what doesn’t need to move. – Illiquidity premium is earned, not guessed. 4. Budget for Risk, Not Just Return Traditional models overemphasize expected return. Recommend budgeting for drawdowns, path dependency, and manager variability. – Don’t just ask “what could I make?” – Ask “how painful could the path be?” – Monitor risk like you monitor return. 5. Rebalance and Re-underwrite, Relentlessly Strategies drift. Managers drift. Portfolios drift. Insist on rebalancing with discipline. – Re-underwrite managers annually. – Re-test assumptions when regimes shift. – Don’t trust yesterday’s structure to hold in tomorrow’s storm. An alternatives strategy isn’t defined by what it owns—it’s defined by how it holds up. As regimes change, portfolios must flex without breaking. What’s your go-to alts strategy when markets shift gears? #bealternative

Colombia just turned away two U.S. deportation flights—triggering an immediate 25% tariff. This highlights a critical reality: today's trade landscape is unpredictable. Businesses must rethink their supply chain strategies to balance risk, cost, and resilience. Strategic diversification is key to mitigating vulnerabilities and enhancing flexibility—whether sourcing from Colombia, Mexico, China, or beyond. How to drive strategic diversification effectively: 1. Dual-Sourcing & Multi-Region Models - Diversify critical supply nodes across multiple regions. - Balance cost efficiency with risk management by leveraging free trade agreements (e.g., USMCA, ASEAN). 2. Supplier Collaboration & Development - Build long-term partnerships and develop suppliers in emerging markets. - Ensure quality and compliance while maintaining cost competitiveness. 3. Regional Hubs & Nearshoring - Reduce lead times and logistics costs by producing closer to end markets. - Take advantage of reshoring incentives like the CHIPS Act and IRA. 4. Risk-Based Supplier Segmentation - Prioritize diversification efforts based on strategic importance and risk exposure. - Use frameworks like the Kraljic Matrix to identify critical suppliers. Diversification isn’t about abandoning China or any other region—it’s about creating a more resilient and agile supply chain. How is your organization approaching supply chain diversification in response to shifting trade dynamics?

"We're spending 80% of our marketing budget on Google Ads." That's not a marketing strategy. That's putting all your eggs in one very expensive basket. And that basket belongs to Google. Here's what happens when you over-rely on one marketing channel... Algorithm changes can destroy your business overnight. Think about that temporary TikTok ban a few months ago... Cost-per-click keeps going up. You're competing with everyone else for the same keywords. You have zero diversification if something goes wrong. The businesses that build sustainable marketing understand diversification: → 30% on paid advertising (Google, Facebook, LinkedIn) → 25% on content marketing and SEO → 20% on email marketing and automation → 15% on brand building and PR → 10% on testing new channels and experiments This isn't just about spreading risk. It's about creating a marketing ecosystem where each channel amplifies the others. Your content marketing makes your paid ads more effective. Your email marketing nurtures the traffic from your SEO efforts. Your brand building reduces your cost per acquisition across all channels. Your paid ads provide immediate data to inform your long-term content strategy. When you put everything into one channel, you're not just risking your marketing. You're risking your entire business. Because the moment that channel becomes less effective or more expensive, you're scrambling to start over with channels you should have been building all along. Diversification isn't just smart investing advice. It's smart marketing advice, too. Brand House Marketing #MarketingStrategy #ChannelDiversification #MarketingBudget #RiskManagement

A nightmare for portfolio managers - when equities, bonds and gold suddenly march in the same direction. Therefore, many investors turn to Private Equity to make their portfolio “more diversified.” Sounds good – feels good – but often it’s an illusion. Data from Mornigstar’s “Diversification Landscape 2025” shows: Private Equity is highly correlated with the stock market. In bull markets it often delivers above-average returns, but in downturns it typically falls alongside equities. Liquidity? Nowhere to be found – which adds pressure in times of stress. Systematic Trend Strategies plays a different game. They capture trends across multiple markets: equities, bonds, commodities, currencies. In crisis years like 2008 or 2022, it often posted positive results while stocks were in free fall. Correlation with equities can even turn negative in stress periods. That’s real diversification! Bottom line: Choosing Private Equity means choosing more equity risk – not less. Choosing Systematic Trend means buying a chance for stability in turbulent markets. And the next turbulence is already just around the corner. Maybe it’s time to stop just saying “diversification” – and start measuring it. How do you diversify your portfolio? How do you stabilise your returns? Sources: The data for the chart comes from the current issue of ‘Das Investment’. https://lnkd.in/edMUfgjm Morningstar “Diversified Landscape 2025: Building Diversified Portfolios” https://lnkd.in/e6wK-qYc #stockmarket #mutualfunds #privatequity

I wish I knew this strategy sooner... The Diversification Method: Give me 2 minutes, and I'll show you how to strengthen your B2B marketing. When we started TACK, we never thought one channel was enough. But we quickly learned that no strategy beyond one channel is risky. It's like putting all your eggs in one basket. At TACK, we've found that diversification is key. Here's what we've learned: • Content is King, Distribution is Queen: We create various content formats—blog articles, SEO, newsletters, podcasts, video. But making great content is just the start. Effective distribution across multiple channels is what truly drives engagement.    • Events Matter: Both virtual and in-person events build relationships. Sponsoring industry conferences and hosting our own webinars have provided invaluable opportunities for direct interaction with our audience. We had an amazing dinner with Commsor 🦕 last night, and we couldn't have had a better time or conversation.    • Partnerships Amplify Reach: Collaborating with other businesses and thought leaders has significantly expanded our reach. These partnerships have opened doors to new audiences and boosted our credibility.    • Continuous Learning and Adaptation: B2B changes constantly. Investing in ongoing education and staying adaptable to new trends and technologies is essential for staying ahead.    • Data-Driven Decision Making: By closely monitoring the performance of our various marketing channels, we continually optimize our strategy. This data-centric approach helps us allocate resources more effectively. Here's the 5-step breakdown: Step 1: Invest in diverse content formats. Step 2: Distribute content effectively across multiple channels. Step 3: Engage in both virtual and in-person events. Step 4: Partner with other businesses and thought leaders. Step 5: Continuously learn, adapt, and make data-driven decisions. The key is to be intentional with your strategies. In the end, diversification strengthens your market position. Don't put all your eggs in one basket. Diversify and thrive. Thanks to Mac Reddin 🦕, Katrine Reddin 🦕, Christian Jakenfelds, Gianna Scorsone, Beth Dunn, Laura Erdem, Leslie Venetz, 🎁 Katie Penner, Ben Gould, Nick Vogel, Jennifer (Cooley) Linehan, Lindsay McGuire, Josh Kim 🤝🏼, and Mark Kilens for some great conversations and an epic evening.

Tech Employees Guide to Diversifying out of a Concentrated Stock Position 💫 A Client Success Story 🎉 Recently, I helped a tech executive diversify out of a concentrated stock position in her company—a common situation for many professionals in the tech industry. The Challenge 🚀 She had built significant wealth through her company's stock and was proud of the growth the shares received. By evaluating her balance sheet and investment portfolio, we saw that her company's shares represented 70% of her overall portfolio! 😱 However, she recognized the risks of having a disproportionately large portion of her portfolio concentrated in a single asset. Step 1: Setting Diversification Targets 🎯 First, we reviewed any potential restrictions on selling, lock up periods, and calculated the tax implications of selling. Next, we set clear targets for reducing her concentrated position. She agreed on a target of reducing her exposure to 20% of her portfolio over a 4-year period, with specific annual milestones to track progress. This gave us a clear roadmap to follow, helping her feel more confident about the process. Step 2: Choosing the Right Strategy 🛠️ We explored several strategies to manage risk and taxes. For her, a combination of systematic selling—where she sold a fixed percentage of shares regularly over the 4 year timeframe—and tax-loss harvesting to offset gains made the most sense. This systematic selling strategy helped her avoid the emotional decision-making that can often derail plans. Step 3: Reinvesting with Purpose 💡 As she sold portions of her stock, we reinvested the proceeds based on her risk tolerance and financial goals. This included a mix of broad market index funds and targeted investments that aligned with her values. The Lesson 🏆 Proactive financial planning and advice can help you reduce risk and stay on track with your long-term goals! At Zenith Wealth Partners, we empower clients to control their financial futures. 💸💫 #TechEmployees #StockAwards #ConcentratedStock

They came to the Bay Area with big dreams. Worked tirelessly. Climbed the ranks. Now, their company stock is worth millions—but they’re trapped. Suddenly, what was once a few RSUs became the foundation of their wealth. They were no longer just employees—they were investors in a company they believed in. But now, that same success feels like a trap. Their wealth is concentrated in a single stock. It’s growing, but so is the anxiety. 📉 One bad earnings call… 📜 One new regulation… 🚨 One market downturn… And everything they’ve built could come crashing down. They want to diversify. But selling feels like betraying their belief in the company. And taxes? That’s another headache. So what’s the solution? How to Escape the Stock Concentration Trap (Without Regret) ✅ Gradual Diversification – Sell in small increments to minimize tax impact while reinvesting in a diversified portfolio. ✅ Hedging Strategies – Use options like protective puts or collar strategies to safeguard against a sudden drop. ✅ Direct Indexing – Instead of buying an index fund, directly invest in the individual stocks within the index. This allows tax-loss harvesting to offset gains, making diversification more tax-efficient. ✅ Exchange Funds – Convert your concentrated stock into a diversified basket of stocks without triggering immediate taxes. ✅ Charitable Giving – Donate shares to a Donor-Advised Fund (DAF) or a Charitable Remainder Trust (CRT) for tax benefits + impact. ✅ Monetization Strategies – Use stock loans or prepaid variable forward contracts to access liquidity without immediate tax consequences. The goal? Align your investment plan with your financial plan. If you’re feeling handcuffed by stock concentration, it’s time to take control. P.S. I write newsletter for immigrant millionaires. 900+ readers are already in—join them here: [capital-we(dot)com/blog]

Diversification is a very specific thing that you can measure. It is the extent to which your portfolio's volatility (risk) is LESS than the sum of each position's volatility. It tells you how much "free-lunch" you're getting, which translates to not only lower risk, but into improved returns. You want the Diversification Ratio to be as high as possible. Because without diversification, the only other way of creating value is by stock picking or market timing. And good luck with that. To maximize the Diversification Ratio, you will want to diversify both types of risk: - Company Specific Risk - Market (Systematic) Risk Company specific risk is easy to diversify with index funds. For example, the std. deviation of the S&P500 is around 16%, while the weighted average sum of the std. deviations of the stocks in the index is around 32%. So depending on your measurement period, you're getting about a 50% reduction in risk without any reduction in return! But don't stop there. You still have the risk of the stock market itself to diversify. You could use AGG bonds like everybody else, but you might as well be holding cash. AGG bonds barely improve the Diversification Ratio at all. But if you used liquid alts to diversify the systematic risk of equities instead, you can improve the Diversification Ratio by another 40-50%. Take a look at your portfolio. I bet if you measured your Diversification Ratio, you would be diversified against company specific risk but have near zero diversification against market/systematic risk. This is why you're not protecting your client's to the downside, and why your portfolio has zero alpha vs the S&P500. Diversifying the systematic risk of equities is the biggest opportunity for adding value (alpha) that you are leaving on the table. It is so simple and intuitive. Yet advisors are still focused on trying to add value through stock picking and/or timing their stock exposure.

One big client might feel acceptable to you. To buyers, it’s a red flag. Dependence on a single customer or just a few projects increases risk. Buyers don’t have your history, relationships, or assurances. Show diversification through repeatable sales, multiple clients, and predictable revenue streams. Highlight recurring contracts, long-term agreements, or varied industries served. Stability creates confidence, reduces perceived risk, and demonstrates that the business can thrive without relying on one relationship or a few relationships. Confidence drives deals, and buyers pay premiums for predictability. The more your revenue is resilient and repeatable, the more attractive your business becomes.

📊LP Strategy – Index Approach to Startup Investing → 6 Takeaways Months ago, Zachary and I wrote about the Index Approach to startup investing for LPs. According to a Harvard University study of 2,000 venture backed startups, it's estimated that: - 75% failed to produce any returns to investors.  - Only 1% - 2.5% of venture backed companies ever become unicorns (worth over $1B). According to a study by CB Insights: - only 0.07% of venture-backed startups have reached decacorn status - i.e. only 1 out of every 1,400 venture-backed startups will become a $10B business. The most obvious takeaway is that picking unicorns and decacorns is extremely hard, and odds are that any single startup investment will return you near zero capital backed. By creating a diversified portfolio of high risk investments, early stage VCs more or less accept that the majority of their portfolio companies will fail or return 0-1x capital back, but the few that make it will become massive winners, providing outlier returns of 100-500x+ invested capital and return the fund, potentially many times over. This is crucial to understand as an LP when you think about allocating into early-stage startups. You can check out our full post (link in comments) but our 6 takeaways to conclude are as follows: 1) While investing in startups can be lucrative, your diversification strategy will play a meaningful role in your returns. 2) While a fund GP may take a different (or more concentrated strategy) because of their access to management, data, perceived competitive advantages, etc. the data suggests as a whole LPs are not served best with this approach, and we agree. 3) If you decide to create a concentrated portfolio, you can create an outlier portfolio, but this strategy for most LPs will result to below market returns. 4) Create a financial plan to determine exactly how much you can afford to invest in startups (using 1-5% of worth as a guideline, but ask your financial advisor). Divide your pooled capital by a very large number (well over 50) to drive you closer to market returns, as it will increase your chance of getting that portfolio outlier that can return your entire invested capital multiple times over. 5) Alternatively, if you want exposure to the asset class in a diversified way but don’t want to put in the effort, a good option is to invest in Rolling Fund from a GP you trust. 6) As a whole, getting small exposure to this asset class has the ability to provide LPs with strong return, but it is a high-risk/high-reward asset class with returns uncorrelated to returns from other asset classes. Return potential for venture is among the highest of all asset classes. -- I write about VC Syndicates. Powered by Sydecar, Last Money In Media is the most actionable venture capital newsletter.