Oh I see- thanks for clarifying! This is a very interesting idea, but somehow it still seems counterintuitive… by the same logic, wouldn’t you also want to overexpose yourself to e.g. publicly traded real estate because most of it isn’t public?
If true, and if most passive (institutional) investors aren’t sufficiently exposed to PE (or real estate), wouldn’t that suggest that the market undervalues this asset class and you can beat the market by investing in it? Honest question, I haven’t thought this through very well, but something still feels counterintuitive that you could create a better passive global market portfolio…
if you think public PE should perform similarly to PE broadly.
I think this might be another big if… though also one should be surprised if there’d be a big discontinuous jump in returns when going from non-traded to traded.
by the same logic, wouldn’t you also want to overexpose yourself to e.g. publicly traded real estate because most of it isn’t public?
Yes, I think that is true as well!
If true, and if most passive (institutional) investors aren’t sufficiently exposed to PE (or real estate), wouldn’t that suggest that the market undervalues this asset class and you can beat the market by investing in it?
Honest question, I haven’t thought this through very well, but something still feels counterintuitive that you could create a better passive global market portfolio...
Hm, very possible I am thinking about this wrong, but it’s pretty intuitive to me. After all, isn’t the “true” global market all investable assets, not just publicly traded assets? It’s the same reason why the Nasdaq Composite is a poor stand-in for the global stock market: for a variety of reasons, it only has a certain subset of publicly traded equities, and other baskets of equities have different risk-return profiles.
Oh I see- thanks for clarifying! This is a very interesting idea, but somehow it still seems counterintuitive… by the same logic, wouldn’t you also want to overexpose yourself to e.g. publicly traded real estate because most of it isn’t public?
If true, and if most passive (institutional) investors aren’t sufficiently exposed to PE (or real estate), wouldn’t that suggest that the market undervalues this asset class and you can beat the market by investing in it? Honest question, I haven’t thought this through very well, but something still feels counterintuitive that you could create a better passive global market portfolio…
I think this might be another big if… though also one should be surprised if there’d be a big discontinuous jump in returns when going from non-traded to traded.
Yes, I think that is true as well!
This is what I was getting at by noting that PE should also be higher beta, so the risk-adjusted returns should not be higher!
Hm, very possible I am thinking about this wrong, but it’s pretty intuitive to me. After all, isn’t the “true” global market all investable assets, not just publicly traded assets? It’s the same reason why the Nasdaq Composite is a poor stand-in for the global stock market: for a variety of reasons, it only has a certain subset of publicly traded equities, and other baskets of equities have different risk-return profiles.