Block A · Asset classes
‹ NadirAlpha financial markets handbook: overview
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Asset classes are the top sorting level of wealth; they differ in return source (interest, dividend, rent, capital appreciation), liquidity and risk profile; the mix (asset allocation) explains most of the long-term result.
1 · Equities
Equity stakes in companies; return from price appreciation and dividends. For detailed segments see Block C.
Long-term return engine; protection against currency debasement through real-asset character.
Highest expected long-term return; liquidity; dividends.
High fluctuation (drawdowns of 40-50% possible); single-stock risk up to total loss.
Equating fluctuation with permanent loss and selling at the low.
2 · Bonds/fixed income
Debt capital; interest-bearing debt securities with a repayment claim. For detailed segments see Block B (topics 13-33a).
Predictable income, stabilization, duration as a counterweight to equity risk.
Running interest; contractual claim.
Interest rate, credit and inflation risk.
Labeling bonds as "safe" across the board; see the duration logic in ch. 5-B.
13 · Government bonds (Bund, Treasuries) · 105 · Yield to maturity (YTM) / yield · 107 · Duration & modified duration · 15 · Corporate bonds investment grade
3 · Money market/liquidity
Investments with maturities under one year: overnight/term deposits, T-Bills, commercial paper, repos, money market funds.
Liquidity reserve, parking position, tactical cash.
Minimal price fluctuation; immediate availability.
Loss of real value under inflation; deposit insurance limits; minimal residual fluctuation in funds.
Holding structurally too much cash; underestimating the return gap ("cash drag") over years.
4 · Real estate (direct/indirect)
Residential/commercial properties held directly or via vehicles (open-ended funds, REITs, institutional Spezialfonds).
Running rental income, inflation linkage, diversification.
Stable cashflows; real asset.
Illiquidity and transaction costs (direct); interest rate sensitivity; valuation lag in funds; concentration risk in single properties.
Misreading the smoothing of valuations (direct/open-ended funds) as low risk.
5 · Commodities
Energy, metals, agriculture; investment access mostly via futures, ETCs or shares of producers, rarely physical.
Inflation protection, diversification, tactical positions.
Low correlation to equities/bonds in inflationary phases.
No running income; roll losses under contango; high volatility.
Expecting spot price performance but receiving the futures roll return; the difference can be substantial.
6 · Precious metals (gold as a special case)
Gold, silver, platinum; gold as a special case without industrial dominance and without cashflow; a "currency without a state".
Crisis and currency hedge, commonly 5-10% as a portfolio addition.
Proven in systemic/inflation crises; high liquidity.
No income; long sideways phases; USD sensitivity.
Valuing gold as a return investment instead of as insurance.
7 · Private equity
Stakes in unlisted companies via funds (buyout, growth, venture); capital lock-up typically 10+ years.
Return premium for illiquidity; access to value creation outside the stock market.
Historical outperformance of good managers; smoothing of valuations.
Illiquidity; J-curve; manager selection disperses extremely; cost burden (2/20).
Reading smoothed valuations as low volatility; entering commitments without liquidity planning.
196 · IRR; money-weighted vs. time-weighted return · 54 · ELTIF
8 · Private debt
Unlisted lending via funds (direct lending, mezzanine); a substitute for bank credit in the mid-market.
Running yield above bond levels; floater character (mostly floating rate).
High coupons; collateral negotiable.
Illiquidity; credit risk untested at scale in recessions; opaque valuation.
Judging a young asset class by a low-default, low-rate decade.
9 · Infrastructure
Stakes in networks, energy, transport, digital infrastructure; direct, via funds or listed operators.
Stable, often inflation-indexed cashflows; the long duration of the income stream matches long-term liabilities.
Regulated/contractual income; inflation linkage.
Regulatory risk; interest rate sensitivity; illiquidity (unlisted).
Confusing "stable" with "risk-free"; political intervention hits precisely these assets.
10 · Hedge funds/absolute return
Actively managed vehicles with an extended toolkit (short, leverage, derivatives); the goal is market-independent return.
Diversification of return sources; drawdown dampening.
Strategy variety (global macro, L/S, arbitrage).
Costs; dispersion of manager quality; liquidity clauses (gates); frequent failure to meet the target.
Reading "absolute return" as a guarantee; it is a goal, not a promise.
11 · Crypto/digital assets
Digital assets on a blockchain basis (Bitcoin, Ether, tokens); access direct, via ETPs or futures.
Highly speculative addition; the diversification argument is disputed; correlation to risk assets is high in stress phases.
High return potential; growing institutional infrastructure.
Extreme volatility; custody/fraud risks; regulation in flux; no intrinsic cashflow.
Position sizing; even small allocations quickly dominate portfolio risk through volatility.
12 · Collectibles (art, classic cars, wine)
Real, unique objects without cashflow; value from scarcity and demand ("passion assets").
Diversification and connoisseurship; in family offices often family wealth rather than investment strategy.
Partly attractive long-term appreciation; enjoyment of the object.
Illiquidity; high ancillary costs (insurance, storage, commissions); forgery/condition risk; subjective valuation.
Extrapolating auction headlines into a market return; survivorship bias is massive.