Diversifying Alternatives and the Rearview Mirror

AQR

Antti Ilmanen, Thomas Maloney

Research

13 Pages

Antti Ilmanen looks at why diversifying alternatives are hard for investors to stick with. He contrasts their objective case in portfolios with the behavioral biases and rearview mirror thinking that lead to under allocation.

Date published: November 2025

Source: Goldman Sachs Global Investment Research. As of November 13, 2025.

Key Takeaways

Behavioral challenge: Diversifiers lag in long equity advances, tempting investors to redeem just before they matter most.
Expectation setting: Clear forward looking return and drawdown ranges help allocators judge success without rear view benchmarks.
Portfolio design: Diversifying alternatives work best when sized to matter, funded thoughtfully, and held through full market cycles.
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