Asset Classes - Correctly Specified

  • Homogeneous
  • Mutually Exclusive
  • Diversifying
  • Proponderance of wolrd investable wealth
  • Sufficient from a capacity perspective

What does the last bullet mean? Does this mean liquid - "capacity"

Think about comparing some strange, esoteric option with a cutoff to others. They behave similarly, but in reality there could only be maybe $1mn or something outstanding, not really possible for any fund to invest in as a class

okay cool, sorta like availability meets liquidity


It means it should be a significant fraction of the portfolio. For example: It cannot be 0.001% of the portfolio and classified as seperate asset class. so it should be sufficient from capacity perspective like say, 5%, 10% of the portfolio.

The asset class should have sufficient liquidity to have the capacity to absorb a significant proportion of the investor’s portfolio and to rebalance the portfolio without incurring high transaction costs.