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S3 Ep. 42

Investment Uncut: Portfolio for the Future with John L Bowman


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This week we’re speaking to John L Bowman. John is Executive Vice President at CAIA, The Chartered Alternative Investment Association. We’re discussing the five key components of what John has called “The Portfolio for the Future”.

We also discuss universal owners, private markets as a beta allocation, crossover funds, permanent capital and lots more. We think listeners will get a lot out of this wide-ranging conversation on alternatives and private markets!

Links mentioned:

We discuss:

The Portfolio for the Future

    • Why this idea, why now?
      • The five marks of the portfolio of the future: 
        • Diversification 
        • Private capital 
        • Fiduciary responsibility 
        • Rise of universal owner (demands on capital: balance impact) 
        • Operational alpha 
    • The Fiduciary mindset: why this is important and has it “gone missing” a bit in the world of atomised portfolios and asset manager funds
    • Private markets: how John is thinking about it
    • Is there a consistent illiquidity premium (or as Cliff Asness would have it maybe a discount to allow for the volatility smoothing)
    • Private markets as a beta play to simply capture where a large chunk of wealth creation is now taking place
    • The role of crossover public/private funds
    • The trend of permanent capital vehicles
    • “Culture Eats Sharpe Ratio for Breakfast” John explains what he meant

What's one thing to take away?

Alternatives. The future is a holistic portfolio that looks across public and private to deliver an outcome and doesn’t need to conform to specific buckets.

What's the most underappreciated thing about this area?

10-12% returns from the 60/40 portfolio is not normal. We’re now returning to a more normal environment where you need to do more to get to the same outcomes. A more normal environment is real returns at 3-5%.

Any recommendations?