Why 'naive diversification' must be avoided

Why investors must avoid 'naive diversification'

Colin Lunnon, fund manager in the multi-manager team at Octopus Investments, explains why it is unfair to paint the alternatives sector as 'all losers and no winners'.

Alternative investments are usually defined by what they are not. They are not an asset class in the 'traditional' sense, such as equities, bonds or cash.  Every market downturn seems to prompt a stinging reassessment of the effectiveness of alternatives as a whole.  Cast your mind back a few years to the global financial crisis for perhaps the greatest example of when alternatives were found wanting in reference to the Yale Endowment fund, which had previously been held in high esteem for its long-term use of alternatives. At the time, the majority of the fund's assets moved as one, ...