UniFi by CAIA Crossing the Threshold - 38

Some long-term best practices include:
* Vintage Year Diversification - Design a manageable commitment strategy that
allows investing across multiple subsequent vintage years.
* Geographic and Sector Diversification - Diversify your underlying managers across
public and private markets to ensure sectors and geographies are represented in
ways that meet portfolio objectives.
* Proper Vehicle Selection - Determine which fund vehicles are appropriate for the
underlying asset class, your firm's operational capacity, and the investor's ability and
willingness to access.
Prioritize Purpose Over Product Labels. As we've discussed in earlier sections, the label of
a certain product or strategy becomes less relevant in a total portfolio context. The label of
a strategy becomes less important the greater the performance dispersion and the more
heterogeneous the underlying strategies become.
Some best practices might include:
* Prioritizing Investor Goals - Investors should first determine how each alternative
investment strategy contributes to the overall investor's objectives to determine its
appropriateness in the first place. As Sylvia Kwan stated, " a goals-based framework
can help engage investors and keep them focused on their goals rather than shortterm
market behavior. Communicating how alternatives contribute to investor
objectives and discussing performance in the context of goals instead of an arbitrary
benchmark can help strengthen the investor-advisor relationship. "
* Aligning Strategies with Risk and Return Drivers - Each new strategy should be
compared to incumbent ones to determine complementary or overlapping risk and
return exposures.
Embrace an " Alternatives Culture. " One of the many reasons why the Endowment Model
was so successful in its heavy implementation of alternative investments was the fact that it
leaned into its strengths and competitive advantages. While most firms cannot (and should
38 THE RETURN JOURNEY
UniFi by CAIA Crossing the Threshold

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