Investment Diversification Techniques

Based on a recent study by S&P Global, emerging markets will play a crucial role in shaping the global economy, contributing about 65% of global economic growth by 2035. While being present in well-established markets across the world is rewarding, it is equally important for businesses to invest in emerging markets, as they offer significant growth potential thanks to a rapid economic development, a rising middle class, and an evolving consumer behaviour influenced by a huge use of digital solutions. To succeed, businesses should tailer their operations, services, or products to match with local consumer habits. Affordability is crucial, as many consumers in emerging markets have lower purchasing power, so offering cost-effective solutions can help businesses reach a wider audience. Forming local partnerships can also provide valuable market insights, easing entry and building long-term trust. While emerging markets offer plenty of opportunities, risks such as currency fluctuations, and regulatory changes must be carefully and proactively managed. By staying proactive and investing in local expertise, businesses can successfully navigate these challenges and focus on the growth potential of emerging markets. #CEO #Leadership #business #Emergingmarkets #BFLGroup

I am very happy to share insights from my recent op-ed in the Financial Times. Emerging markets have often been viewed as risky, but new data from the Global Emerging Markets Risk Database Consortium paints a different picture. With comparable default rates and superior recovery rates, investing in emerging markets offers resilience and potential. The statistics, spanning 30 years of lending, show that the risks in emerging markets compare favorably with other asset classes. Additionally, the portfolio diversification they offer proves beneficial during global stress periods. As a co-founder and major contributor to GEMs, IFC is committed to providing crucial data to help investors make informed decisions about emerging markets. Reallocating just 1% of global assets each year could significantly impact growth and development in these countries. Read more: http://wrld.bg/PWRb50Ro0tq The World Bank IFC - International Finance Corporation

Which Sectors in Real Estate Are Family Offices Likely to Invest in Now? As family offices consider where to allocate their capital, real estate remains a primary focus. Its tangible nature, potential for steady income, and ability to hedge against inflation make it an attractive asset class. However, the specific sectors within real estate that capture family office interest are shifting based on evolving market dynamics, long-term goals, and generational priorities. Family offices are increasingly focused on specific real estate sectors that align with their long-term goals and investment strategies: 1. Multifamily Housing: A preferred sector due to stable cash flows and growing demand in both urban and suburban areas. There's also rising interest in affordable housing, driven by both impact investing and market needs. 2. Industrial and Logistics: The e-commerce boom continues to drive demand for warehouses and distribution centers. Family offices are particularly interested in last-mile delivery properties. 3. Medical and Life Sciences: Healthcare-related properties offer stability and long-term leases, making them attractive. The aging population also drives demand for senior living facilities. 4. Hospitality: With the rebound in travel, there’s renewed interest in hotels, resorts, and unique experiential properties. 5. Office Space: Investments focus on flexible office solutions and properties with strong sustainability credentials, adapting to hybrid work trends. 6. Student Housing: Consistent demand, resilience during economic fluctuations, and long-term leases make student housing appealing. It also offers opportunities for global diversification. Investment Strategies - Family offices leverage their significant capital and long-term perspective through: 1. Direct Investments and Partnerships: Direct control and flexibility in niche markets are key benefits, often complemented by strategic partnerships. 2. Value-Add and Opportunistic Strategies: Higher returns are sought through investments in properties needing redevelopment, with a focus on market timing. 3. Long-Term Holdings and Legacy Projects: Real estate is used to preserve wealth across generations, with a focus on long-term capital appreciation and legacy-building. 4. Geographic Diversification: Family offices are increasingly investing globally, partnering with local experts to mitigate risks and tap into emerging markets. Family offices remain committed to real estate, leveraging their unique advantages to navigate and capitalize on market opportunities. #familyoffice #familyoffices

Portfolio diversification is top of mind for investors right now – and bitcoin’s potential as a portfolio diversifier is driving investor interest in the cryptoasset. Bitcoin investors are deeply focused on several of its key attributes: the uncorrelated nature of bitcoin and its interplay with geopolitics. But what about risk? Is bitcoin a “risk on” or “risk off” asset? Our answer: it’s not that simple. We explore this issue in our latest insight as part of our commitment to help educate investors about this new asset class. What we’ve found is that, in short, bitcoin can be a unique portfolio diversifier. We believe its nature makes it unsuitable for the risk on/risk off framework, and most other traditional finance frameworks. On a standalone basis, bitcoin is a risky asset. But we believe that bitcoin is an asset with risk and return drivers that are distinct from traditional asset classes and that, over the longer-term, its fundamental drivers have been starkly different, and in many cases inverted, versus most traditional investment assets. And yes, we maintain this conviction even as short-term market trading behavior diverges from what bitcoin’s fundamentals would suggest. We recognize that bitcoin is in the early stages of its journey. I encourage you to read our latest insight to better understand the very unique nuances of this new asset class. https://1blk.co/3TAErHS

I’ve invested in 255 Y Combinator companies. Here is why and how: In 2017, a couple of years after Earbits was acquired, my co-founder and I wanted to start investing in other startups. As YC alumni, we have early access to YC deals, which arguably offers the best deal flow an investor could hope for. However, identifying unicorns before they turn into unicorns is nearly impossible. So instead of cherry-picking, we decided to take a different approach: index investing in YC companies. Our thesis was that by building a diversified portfolio, we would be able to produce better results while lowering risk. So we put the theory to the test. Our first fund was fairly small, and we invested in 19 companies from the S17 batch. Within a few years, two of the companies turned into unicorns, and another was acquired by the NY Times. So, we did it again in W21. This time, we invested in 50 companies. To our delight, the second fund performed as well as the first. Both funds are outperforming 90% of benchmarked funds from their respective vintages. To date, we’ve invested in 255 companies across 5 batches. We take great pleasure in writing easy and often first checks to exceptional founders. ____ 𝐓𝐰𝐢𝐜𝐞 𝐚 𝐲𝐞𝐚𝐫 𝐰𝐞 𝐢𝐧𝐝𝐞𝐱 𝐢𝐧𝐯𝐞𝐬𝐭 𝐢𝐧 𝐘 𝐂𝐨𝐦𝐛𝐢𝐧𝐚𝐭𝐨𝐫 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬. 𝐖𝐞 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐝𝐢𝐯𝐞𝐫𝐬𝐢𝐟𝐢𝐞𝐝 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨𝐬 𝐰𝐢𝐧. 𝐃𝐌 𝐦𝐞 𝐢𝐟 𝐲𝐨𝐮’𝐝 𝐥𝐢𝐤𝐞 𝐭𝐨 𝐥𝐞𝐚𝐫𝐧 𝐦𝐨𝐫𝐞. #founder #entrepreneur #startup #venturecapital #vc

I asked 3 of my biggest hedge fund clients to share their Holy Grail for macro investing. Here is what they told me. True Diversification is the holy grail of macro investing. Look at the chart below to understand why. 1️⃣ If you have stocks and bonds (2 assets) in your portfolio and they exhibit a positive 0.5 correlation (orange line), by adding another correlated asset like corporate bonds (3 assets now) you will slightly increase your return per unit of risk. If your old portfolio had a 5% volatility and 4% expected return, you now have 5% volatility and 5% expected return. Great! 2️⃣ But look at what happens if you can add uncorrelated (or negatively correlated) assets – the dark blue line. If you have stocks and you add uncorrelated (or negatively correlated) bonds as a second asset class, your return per unit of risk increases substantially. Add 7-10 uncorrelated asset classes to your portfolio, and with a 5% volatility you can achieve 8% returns. That's amazing! 👉 And here is when leverage comes into play. When assets exhibit a stable zero or negative correlation between each other, investors can use leverage to amplify returns while keeping risk under control thanks to diversification. 3️⃣ And so they lever up: everybody wants a portfolio with 10% volatility and 16% return targets. This sounds amazing. But here is the catch. When correlations flip sign, the assumptions behind these leveraged portfolios are off. This is key. This is when big macro flows start hitting the market. We saw this happening in 2022 when the stock/bond correlation turned positive after 15 years of almost uninterrupted negative correlations. Investors were used to seeing bonds as a diversifier to stocks, and so they had leveraged their portfolios under that assumption. The blow-up in 60/40 portfolios was sudden and its magnitude was severe. Today, we might be on the verge of something different but equally important. The return of the negative stock/bond correlation. If this happens, bonds will become super attractive for institutional investors: they will guarantee positive real yields while preserving hedging properties for their stock positions. What do you think of the use of leverage, and do you think we are about to see the return of a negative stock/bond correlation? P.S. Enjoyed this macro analysis? Follow me (Alfonso Peccatiello) so you don't miss any post and stay updated on the launch of my Macro Hedge Fund! P.P.S. FREE TRIAL to my Institutional Macro Research? Join the biggest institutional investors in the world reading it every day - send me a DM and I'll set you up!

Solar is paving the way. The transition from fossil fuels to renewable sources is reshaping our future as the global energy landscape evolves. Solar power, with large-scale facilities in China, India, Egypt, and the United Arab Emirates, is at the forefront of this transition, signalling a global shift towards cleaner energy. However, the global energy challenge is too complex for a single solution. While solar energy is an important component, it cannot be solely responsible for lighting our future. Each country has unique energy requirements and must develop a tailored approach that includes wind, hydro, nuclear, and other renewable sources in a comprehensive energy mix. This strategic diversification is critical for building a resilient and dependable energy infrastructure. By combining the strengths of various energy sources, we mitigate the risks associated with reliance on a single type of power. A diverse energy portfolio, like a well-equipped toolbox, ensures stability in the face of unpredictable weather, fluctuating demand, and potential technological or supply-chain disruptions. This multifaceted approach not only meets current needs but also lays a strong foundation for future generations. #sustainability #esg #climatechange #climateaction #energy #greenertogether

Australia's 🇦🇺 sovereign wealth fund done with government bonds, relying on hedge funds instead for diversification The Future Fund providing an "alternative" model (in more than one sense) to the traditional 60:40 balanced portfolio 💼. As Bloomberg reports: "Australia’s sovereign wealth fund has called time on using government bonds to diversify equity exposure and instead favors hedge funds to balance risk in its A$223bn ($1️⃣4️⃣9️⃣bn) portfolio. The Future Fund will look to equity market-neutral & systematic macro strategies offered by hedge funds after declaring 'the era of using government bonds to diversify equity-related risk is over.' ⚠️ The shift is the result of the fund’s view that rocky geopolitics will reorder global trade, leading to higher inflation, interest rates and volatility and a stronger correlation between stocks and bonds. 💡'So in that environment, government bonds or duration is just a less reliable diversifier,' Future Fund Chief Investment Officer Ben Samildsaid in an interview. 'There are different hedge fund strategies that we can own that have historically performed very well, particularly in times of quickly changing inflation.' ➡️In addition to macro and market-neutral strategies, the fund will consider commodity-focused funds, volatility investing and trend-following portfolios to diversify risk, Samild said. ⬅️ Equities make up 37.2% of its assets, according to first-quarter data. The fund is a big proponent of alternative assets. Hedge funds have typically accounted for between 10% and 20% of its portfolio, according to Samild. Hedge funds, private equity, venture capital, unlisted infrastructure and property together made up more than 40% as of March. The fund outsources billions of dollars to some of the world’s largest alternative asset managers including Man Group, Citadel, Blackstone Inc. and Brookfield Asset Management. 'We have a very large hedge fund portfolio that is pretty well established,' Samild said. 'We like to be strong partners 🤝 and don’t churn through. That is one of the reasons we think we have a comparative advantage in getting access to high-quality managers,' he said. Future Fund anticipates a further shift in global trade dynamics, marked by governments championing 'economic resilience' instead of the focus on cost efficiency that has marked the past 3️⃣0️⃣ years. This will bring supply chains closer to home 🏠 countries and support domestic manufacturing in high-tech areas such as semiconductors, according to the fund. 'We’ve gone from a world 🌐 where there was an assumption that there were ever-lower barriers and frictions to international trade,' Samild said. 'We’ve always thought one needs to be a little cautious about that assumption and now we think you need to be even more cautious.'" (+++Opinions are my own. Not investment advice. Do your own research.+++) Tap the bell 🔔 to subscribe to my profile & you'll be notified when I post. 💸

Impact investing in emerging markets is full of opportunity—but most investors get it wrong. They assume capital alone will drive scale. They mistake mission for a business model. They expect VC-style hypergrowth in markets that don’t operate on those timelines. The result? Billions lost in misaligned investments. But the best investors? They take a different approach. 3 Investment Strategies That Win 1️⃣ Founder-First Capital Investment success isn’t about finding the right idea—it’s about backing the right operator. Markets shift, conditions change, and execution is everything. 📊 80% of successful impact investments prioritize founder resilience over just business models. (GIIN Report) 2️⃣ Scalability-Driven Investing An impact-driven business without a clear path to scale is just a local initiative with a short shelf life. The best investors fund businesses that can expand beyond their first market—or they don’t fund them at all. 3️⃣ Ecosystem Investing Capital alone doesn’t build industries. The best investors engineer access—to supply chains, regulatory inroads, talent pipelines, and strategic partnerships. The highest returns don’t come from funding companies—they come from shaping industries. 2 Strategies That Fail ❌ Mission-First, Revenue-Later Investing A great mission doesn’t pay salaries, fuel expansion, or create resilience. If impact isn’t tied to a scalable revenue model, it’s not an investment—it’s a grant in disguise. 📊 Over 60% of impact startups that fail cite a lack of sustainable revenue as the primary reason. (Stanford Social Innovation Review) ❌ Short-Term, High-Expectation Investing Emerging markets don’t operate on a Silicon Valley timeline. Investors expecting hypergrowth without accounting for market complexities end up making premature exits or forcing founders into unsustainable scaling. Key Takeaway here: The difference between real impact and wasted capital isn’t just the business model—it’s the investment strategy behind it. 📌 What’s the biggest mistake you see in emerging markets? Let’s discuss. ♻️ Share this with someone who deserves to hear it.  👉 Follow Ben Botes for more insights on Leadership, Scale-ups and Impact Investment.

🌍 "If India is just 5% of the world’s market cap, why is 100% of your portfolio here?" In my latest conversation with Devina Mehra, Chairperson & MD and founder of First Global, we broke down why global diversification isn’t optional—it’s essential. 📊 Key Takeaways: ✅ Rupee depreciation is real: The INR has fallen 85% against the USD in Devina’s career. This impacts long-term financial planning in ways most investors ignore. ✅ Home country bias hurts: India is <5% of global market cap, yet most investors have 90%+ of their portfolio here. ✅ The US is not the world: Yes, US markets have dominated for a decade, but no trend lasts forever—diversify across geographies & asset classes. ✅ S&P 500 isn’t enough: Simply buying a NASDAQ ETF or the "Magnificent 7" tech stocks isn’t true diversification. ✅ Global investing ≠ complex: LRS allows Indians to remit $250,000 per year, and platforms now make international investing easier than ever. 💡 Devina’s Golden Rule? Diversification isn’t just about stocks—it includes bonds, commodities, and different economies. 🚀 Are you diversifying globally in 2025? Or is your portfolio still India-centric? Let’s discuss! 👇 Watch the full episode on Personal Finance TV for expert insights! 🎥 #GlobalInvesting #Diversification #FinancialFreedom #InvestSmart #PersonaFinanceTV