The Paper Trail: Beyond Finger Painting

September was a whirlwind! Huntington Beach for the annual Future Proof pilgrimage, then St. Louis, then back to Orange Country, and finally capped off the month in Michigan for the Zach Bryan concert at the "Big House" in Ann Arbor. 

It ended up setting a new record for largest ticketed concert audience in U.S. history, with over 112,000 in attendance. It was also the first-ever concert at Michigan Stadium.

I only knew a couple of his songs going into the show - it was my wife's idea to go (U of M alum; big country fan)

Needless to say, by the end of the night I was a full-fledged fan. Dude puts on a hell of a show.

Now, please enjoy the September 2025 edition of The Paper Trail! This month's research roundup features:

• Evergreen private equity fund performance
• The dependability of long-term Treasuries
• Harnessing diversification via capital efficient strategies
• European small cap stocks
• Gold's portfolio utility
• The art and science of alternative investment portfolio construction
• Commercial real estate opportunities
• Bitcoin's expected return
• A framework for private market implementation
• Professional sports franchise valuation
• Trend following and performance dispersion
• Allocating across equity styles

Have evergreen private equity funds delivered value relative to public stocks?

"Retail allocations to evergreen private equity funds are accelerating. Our new Cliffwater Evergreen Private Equity Index provides evidence that fund investors on average have been rewarded. However, fund selection and portfolio construction are critical. The good news for investors is that there appears to exist an attractive pool of strong performing evergreens from which to build a private equity allocation."

Introducing the Cliffwater Evergreen Private Equity Index (Cliffwater)

Are long-term Treasuries still a dependable portfolio diversifier?

"In the thirteen historical scenarios examined, long-term Treasuries retained value best (and actually appreciated) in six of the tracked periods and came in a close second in a seventh scenario. For nearly all of these cases, equities suffered declines, many of them quite severe. Neither of the other potential hedges – cash or investment grade bonds – protected nearly as well. On the flip side, however, long-term Treasuries performed the worst in four of the scenarios, which were periods in which interest rates rose markedly."

Long-term Treasuries in Diversified Portfolios (Meketa)

How can capital efficiency help investors unlock the "free lunch" of diversification?

"Investors who embrace a total portfolio approach to monitoring performance – maintaining focus on contributions to total portfolio risk and return – are better able to harness diversification to improve their chances of long-term investment success. Capital efficient investments are the key to translating this diversification directly into higher expected returns."

Exploring Capital Efficiency (AQR)

Are small-caps the best way to play European stocks?

"The stock market appears to be acknowledging this reality by rewarding Europe’s domestically oriented firms, which also tend to be small and microcaps that operate in traditional “value” sectors. With smaller stocks trading at deep discounts relative to large caps, we believe the outperformance of domestically oriented firms following a historic realignment of trade terms may be ushering in a new Golden Age for Europe’s small and microcaps."

Europe’s Small-Cap Golden Age (Verdad)

What is Gold's portfolio utility?

"In the abstract, one might struggle to imagine a compelling pitch for an asset that never generates cashflows, has near-zero expected risk-adjusted real returns, and could theoretically lose all its value overnight. Working with an optimizer reminds us that this intuition might miss the mark. It helps us see that gold’s relative lack of productive applications is in fact a primary benefit, making gold broadly uncorrelated to pro-cyclical assets even as it grows along with global wealth. That diversifying property offers potential portfolio utility in a steady state."

Worth its Weight? Assessing Gold's Portfolio Utility (D E Shaw & Co)

Is alternative investment portfolio construction evolving from art to science?

"Portfolio allocation in alternatives should instead be informed by forward-looking data that accounts for the anticipated macroeconomic environment's impact on asset classes over the forecast horizon. This data should be presented as net-of-fees, time-weighted returns, adjusted for the smoothing effects inherent in alternative investments, and should be comparable across both traditional assets and alternative asset classes. By adopting a forward-looking data approach, investors can better size their portfolios to access the outcomes in alternatives."

Beyond Finger Painting – Building Active Multi-Alternatives Portfolios (GIC x J.P. Morgan Asset Management)

Where are the best opportunities in today's commercial real estate (CRE) environment?

"With the prospect of structurally higher cap rates, we believe the key to outperformance will be identifying supply/demand differentials that drive rent growth and maximizing free cash flow via asset selection, entry price optimization and operational execution."

Real Estate Reset: Capitalizing on Record Dispersion (DavidsonKempner)

Is there a proper way to value Bitcoin?

"Our preferred long-term valuation model is a Total Addressable Market (TAM) model, which aims to estimate the future size of the markets bitcoin can serve along with its estimated future penetration of those markets. Given bitcoin’s fixed long-term supply, this model allows us to estimate the future value of the asset."

Bitcoin Long-Term Capital Market Assumptions: 2025 (Bitwise)

Is there a better way for investors to implement their private market allocations?

"Many allocators and investors are still relying on subjective and qualitative frameworks when making decisions on asset allocation, portfolio construction and timing in private markets. We believe that today a larger and more diverse allocation, with more asset classes now accepted as “core” alternatives, as well as an increasing number of new investors in private markets, requires a well established, repeatable, objective and data-driven framework to support investment decisions."

Private Markets Asset Allocation Framework (Morgan Stanley)

How are professional spots teams valued?

"While it is challenging to value brand assets like teams, it is not impossible either. First, teams are driven by current fundamentals just like any other company; in fact, we cannot make sense of the long-term returns in sports without appealing to positive changes in fundamentals (improving revenue quality and player payment reform). Second, teams are driven by potential fundamentals, or brand value, when considering the accumulated loyalty and passion of their customers (the ‘fanatics’). Growing brand value is a function of strategies that prioritize fan experience, marketing, and customer value over near-term revenue, and great operators balance delivering for fans with optimizing for monetization that deliver both long-term growth and long-term sustainability without one sacrificing for the other. Valuing sports teams can be done scientifically by incorporating both factors."

How Sports Franchise Valuations Actually Work (Arctos Partners)

What drives performance dispersion among trend followers?

"The more meaningful dispersion in the latter period stems from a combination of design choices. In the case of the market universe, the period following the GFC was widely regarded as the CTA winter, where traditional trend struggled amid the currents of the Federal Reserve put, while the proliferation of liquid, tradable alternative markets basked in plentiful trends. With regards to speed, the evidence is less clear, although we may posit that the whipsawing brought about by policy intervention was more conducive to a slower, passive approach. Carry and allocation differences also contribute to the uptick in dispersion, although the story boils down to more specific market environments in these cases."

A Trend Following Deep Dive: The Dynamics of Dispersion (Man Group)

What's the best way to allocate across equity styles?

"The optimal allocation to styles depends on the investor’s objective. Long-term absolute return investors benefit most from defensive factors like low volatility, though this comes with high relative risk and weak information ratios. Benchmark-relative investors are better served by diversified mixes of return-oriented factors such as value, momentum, profitability, and investment. Attempts to time factors across strategies require unrealistically high levels of predictive skill to offset costs. A more robust solution is integration: combining factors and signals in a single portfolios lowers turnover, with greater capital efficiency."

Strategic Style Allocation: Absolute or Relative? (Robeco)