Alternative Investments: First Things First
Alternative Investments: First Things First (Structures, Liquidity, and Fees)
Alternative Investments: First Things First (Structures, Liquidity, and Fees)
This week's blogpost - https://bahnsen.co/3Ur0bda
On the Thoughts on Money (TOM) podcast, host Blaine Carver with colleagues Brett Bonecutter and Steve Tresnan discuss Steve’s article “Alternative Investments: First Things First,” explaining what alternative investments are, why The Bahnsen Group uses them, and key mechanics clients often find confusing. They frame alternatives as tools for diversification when stocks and “boring bonds” may not offset each other, and as a way to access the broader economy of mostly private companies. They outline the “holy trinity” of private alternatives—private equity (owning private businesses), private credit (lending to them), and private real estate—emphasizing trade-offs like reduced liquidity and the importance of manager execution and due diligence. They compare closed-end drawdown funds (capital calls, vintages, J-curve, long time horizons) with evergreen/open-end structures (easier funding, limited periodic liquidity, reporting lags), and explain fees such as “2 and 20” and why costs can be higher due to labor-intensive processes.
00:00 Welcome to TOM
00:24 Why Alternatives Matter
03:26 Diversification Beyond 60/40
07:10 Private Markets Opportunity
09:26 Liquidity Tradeoffs Explained
13:39 Three Core Alt Categories
15:34 Private Equity Value Add
19:43 Are Alternatives Riskier
21:30 GPs vs LPs Basics
22:40 Manager Selection Matters
30:35 Capital Calls and Drawdowns
34:46 Evergreen Funds and Liquidity
36:48 Valuations and Reporting
40:09 Fees Two and Twenty
44:30 Wrap Up and Resources
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