I spent nearly two decades in the entertainment business building slates of content for audiences at studios and networks. That world taught me something that applies directly to portfolios: the value is in the mix, and in the people calling the shots.
A note on the numbers: all figures are past performance and no guarantee of future results. Private-market returns are fund-level, generally net of fees except where noted, and based on reported valuations rather than daily prices, so treat them as good estimates rather than exact measurements.
The logic of a Hollywood content slate is simple. A studio assembles a mix of projects: some dependable earners like the returning franchise that reliably brings people in, some steady mid-budget films that turn a modest profit, and every so often a real swing, the kind that when it hits can carry a whole year. A portfolio works the same way. You want income, growth, a little tax-advantaged upside, some protection when markets turn, and the occasional right-sized yet high-risk swing that pays off big. No single investment does all of that, which is why you build a slate. A traditional portfolio of stocks and bonds is essentially a two-genre slate. It has served investors well, but the past several years exposed its limits. The two engines that are supposed to offset each other increasingly moved together, and the bond side didn’t carry its historical weight: over the five years through 2025, the Bloomberg US Aggregate Bond Index returned about zero per year on average, leaving a dollar invested at the start of 2021 essentially flat five years later. That was an unusually rough stretch, driven by the index’s worst calendar year on record in 2022. Bonds still play an important role, though, as the portfolio’s shock absorber and a reliable income stream, especially now that higher yields have improved their outlook. But that stretch of weak returns pushed many investors to ask a fair question: where else can return and diversification come from?
How to read this: when the bars are negative, stock and bond prices move in opposite directions, so bonds cushion your portfolio when stocks fall. When the bars are positive, the two tend to drop together and bonds stop doing that job. The point is that we’ve recently flipped from negative back to positive.
Alternatives widen the slate. Each one does a different job: some are built for steady income, some for appreciation over years, some for the occasional outsized win, and some simply to move differently from the public markets you already own. In a traditional buy-and-hold portfolio, you’re the one doing the work, holding through every rise and fall. With alternatives you’re still buying and holding, but inside each fund a manager is actively building a slate of their own, underwriting loans, improving companies, backing founders, deciding which investments make the cut. You’re hiring that judgment, not just buying exposure. It’s not a free lunch, and these strategies suit investors who understand the tradeoffs.
There’s something genuinely exciting about this particular moment. For most of financial history these strategies were walled off, the preserve of big institutions and the very wealthy. That’s changing quickly. Today around 86% of U.S. companies with more than $100 million in revenue are private, which means more and more of the real growth is happening off the public markets and staying there longer, and global alternative assets have swelled from about $1 trillion in 2000 to more than $21 trillion today. If you find this stuff as interesting as I do, it’s a hell of a time to be paying attention.
First, Why I Appreciate Performance Fees
Most alternative managers charge two kinds of fees: a management fee that keeps the lights on, and a performance fee, often called carried interest, that they collect only after clearing a return threshold for their investors. In practice that typically means a management fee of 1.25 to 2% and 15 to 20% of profits, usually payable only above a preferred return in the range of 6 to 8%, though terms vary fund to fund. Performance fees make some people uneasy, and I understand why, because they are a real cost and a drag on returns. Still, I like it when incentives are aligned. My old industry is the cautionary tale. Hollywood used to run on backend: if the movie was a hit, everyone who made it got paid. Then the tech companies pushed the industry to flat fees, and the incentive to make something great went with it. Watch almost any original movie on Amazon or Netflix. (I can throw that stone, I worked at Amazon and produced a film for Netflix.) The work turned mediocre because no one’s fortune rode on how good it was. Alternatives still run on “backend.” The management fee keeps the team employed, but clearing the thresholds is where they make their real money, and those thresholds are your returns. That is exactly the alignment you want from someone making decisions with your capital. It’s not free, and it doesn’t guarantee good outcomes, but I’d rather pay well for performance than pay a little for indifference, or have a very large portion of my investable net worth passively tracking the S&P 500, which is unstimulating, takes too few swings, and offers too little real diversification. Sorry, DIYers, I said it.Different Genres, Steadier Ride
The main appeal of alternatives is that many don’t move in lockstep with public markets, so a measured allocation can improve a portfolio’s balance of risk and return. Public markets are brutally efficient: over a decade, more than 80% of active managers fail to beat the S&P 500 net of fees, which is why indexing took over large-cap investing. Alternatives are a different game, less efficient, less crowded, and that inefficiency is exactly where a good manager earns their fee. The exhibit below illustrates the idea: across conservative, moderate, and growth-oriented blends, shifting 10% into alternatives has historically produced higher returns with lower volatility. One caveat: because these assets are sparsely traded, their value is estimated periodically rather than set by the market every second, so some of that steadiness is smoother pricing, not lower risk. That lack of daily trading has a flipside too: holdings that can’t be sold on a whim are also spared the panic sell-offs that seize public markets. There’s no buying the rumor and selling the news when you can’t sell for another quarter.
The Liquidity Trade
Most alternatives ask you to give up daily liquidity. Your capital is committed for a period, and some vehicles can limit or pause withdrawals. That’s the central tradeoff: because managers aren’t forced to meet daily redemptions, they can hold through short-term noise and earn a premium for patient capital. The flip side is a feature too: no investor can dump their stake at the bottom, so the fund’s value never gets dragged down by a stampede for the exits. But it’s the same gate: the one that stops a panic sell-off also stops you from cashing out when you simply want your money. So don’t fear illiquidity, plan for it, with money you won’t need on short notice.
Where the Income (and Growth) Comes From
Each sleeve has its own personality, and it helps to know what job each one does before deciding whether it belongs in your portfolio.
Private Credit (income). The returning franchise of the slate: not flashy, but it reliably brings in income. Lending to established companies outside the traditional bank channel, a role banks have stepped back from since the 2008 financial crisis. You’re the lender here, paid a contractual rate of interest rather than betting on a price going up. Most of these loans are senior secured, so you sit near the front of the line if a borrower runs into trouble, and floating-rate, which means the income rises when short-term rates rise, the opposite of how a traditional bond behaves. Losses, when they come, come from borrowers defaulting rather than from prices bouncing around, and the capital is committed, not something you can sell on a moment’s notice. The income can be meaningful: as of year-end 2025, direct loans of this kind yielded around 9% at the loan level, before fund fees, well above the 1.4% dividend yield on U.S. stocks and the 4.4% yield on the 10-year Treasury.
Private Real Estate (income and growth). The dependable mid-budget picture: steady returns, with the occasional real upside. Owning the building and collecting the rent. Leases produce a relatively steady stream of income, the property itself can appreciate, especially when a manager adds value through renovations, repositioning, or a well-timed refinancing, and both rents and values often move up alongside inflation, which is much of the appeal when prices are rising. The flip side: most real estate is bought with borrowed money, and leverage amplifies losses as readily as gains. Values respond to interest rates and to local supply and demand, and vacancies eat into income. Like everything on this list it is illiquid, and its value is appraised periodically rather than quoted every day. As of year-end 2025, income on U.S. private real estate ran around 4%, with any appreciation on top of that (Regatta usually likes to see real estate deals projected to net between 7% and 9%).
Private Equity (growth). The prestige project: expensive, slow to develop, and often unremarkable on early looks, with the payoff arriving late. Buying whole companies, or controlling stakes in them, improving how they run, and selling them a handful of years later for more. The return comes from real operational change, not a stock quote ticking higher: grow the revenue, fix the margins, clean up the debt, often with leverage amplifying the result. This is also where active ownership counts for the most: a private equity manager usually invests their own capital alongside yours, takes board seats, and has a direct hand in how the business is run, things index funds and mutual fund managers simply don’t have. They’re not picking a stock and hoping. They’re trying to change the outcome. This is not an income sleeve. Expect the J-curve, where fees and conservative early marks make returns look poor before value shows up late in a fund’s life, and expect wide dispersion, meaning the spread between a top-tier manager and a weak one is far greater than in public markets. Over the past decade, top-quartile private equity funds returned about 20% a year after fees, but most managers came in well below that. A bad entry price or too much leverage can turn a good company into a bad investment.
Venture Capital (growth). The big swing. This can be done in early stage, backing young companies, most of which won’t make it. The math is unusual and worth understanding: returns follow a power law, where a small number of investments, sometimes a single one, can return the entire fund and carry all the losers with it, while the majority return little or nothing. It is about being spectacularly right once in a while, not right often. That profile demands a long horizon, often a decade or more, a stomach for writing off most positions along the way, and access to the small circle of managers who consistently see the best deals. There are also later-stage investments, sometimes called growth equity: backing companies that are already working, with real revenue and customers, to help them scale. Fewer go to zero, but fewer become moonshots. For both of these strategies, there’s no income, the capital is locked up for years, and a total loss on any individual investment is possible. Over the past decade, top-quartile early-stage venture funds returned about 16% a year, also net of fees, but that figure belongs to a handful of firms, and most funds landed well below it, so it pays to choose carefully, with an advisor who knows the managers.
Opportunity Zones (real asset plus tax). (See my last newsletter!) The location shoot: just as a production films in Georgia or New Mexico to capture the tax credit, an Opportunity Zone rewards you for building in a designated area. It’s usually real estate or an operating business, and the tax treatment is the draw: tax on reinvested capital gains can be deferred, and an investment held long enough may see the appreciation on the Opportunity Zone portion itself go untaxed. The discipline that matters most is not letting the tax tail wag the dog, because a weak project with a tax break is still a weak project, and the property or business has to stand on its own. The rules and holding periods are specific, the commitment is long by design, and the underlying project carries the usual execution risk.
Manager Selection Is the Whole Game
All of this raises the stakes on choosing the right manager. In public markets, most managers land within a few points of each other. In alternatives, the spread is enormous, wide enough that the manager you choose can matter more than the asset class itself. Which is why Regatta obsesses over manager selection.
