The Siren Song of Alternatives: Often Wrong, Never in Doubt

By The Auour Investments Team via

Danny Deutsch’s motto and the title of his book, Often Wrong, Never in Doubt, are about the power of confidence and moving forward even when it results in as many misses as hits. It worked for him. It doesn’t work in investing, which relies on empirical evidence, not hope. However, we find the motto does apply to the alternative investing space—given its poor performance coupled with confident messaging.

The size of this space is more than $6 trillion and encompasses real estate (for investment purposes), private equity, and hedge funds, as well as other, more esoteric forms of investing. Alternatives have seen substantial growth as investors look to protect their assets and strive for superior returns. It’s a wonderful idea. But one needs to understand the success rate of these alternatives and where they do and don’t fit within the investment framework. 

In the early days, alternatives were investment vehicles that gave you access to the really smart investors and gave them the freedom to go wherever they felt there was an opportunity. Given the large fees these alternatives charged, it’s no wonder that many institutions and investment experts created their own offerings. And so, the alternatives trend grew. Unfortunately, the performance of the sector, in most circumstances, lags the traditional public markets and, in most situations, takes on more risk.

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