Why non-correlation should matter?

The #1 most important rule of wealth management is to combine assets that make money independently and don’t all correlate with one another. This is how you really crank up your risk-adjusted rate of return. As a hedge fund manager and the writer of this blog, I admit that I am biased. But when you’re shopping for a hedge fund, make sure that:

(1) it doesn’t correlate with the stock market (duh!) and, more importantly
(2) there isn’t a fundamental reason why the hedge fund strategy would over time correlate with the markets. Some correlation may come in disguise over time.

Correlation isn’t just about math. It’s about understanding fundamental market drivers. Keep in mind that there are a lot of garbage hedge funds out there, saying they move independent to the market, so be careful. There are some legitimately good ones, though. Give the Hedge Fund, a look and find out if it is truly not correlated to the broadest sectors in your portfolio.

One of the most popular methods of diversification is looking abroad at international markets and finding safe alternatives. CAPQ’s Tri-Party Venture Fund, Galo Specialty Fund, with its pre-qualified Venture Partner being an international major league football (soccer) team has the benefit of not only being a highly coveted asset in your portfolio, in a well-performing investment sector, while being non-correlated to most other the U.S. investments.

Let me know if you have any questions, comments or simply want to chat.

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