A 10% loss needs an 11% gain to recover, but a 50% loss needs 100%. Deep drawdowns are expensive to climb out of, which is why alternatives that reduce volatility can help investors actually bounce back.
Let's think about drawdown for a second. If my portfolio is at 100 and I lose 10, I'm at 90. To get back to even, if I get 10% gain, I'm only at 99. And so it's like, wait a minute, so I need 11% to get back to even. If I'm at 100 and I draw down 20%, I now need 25% to get back to even, right? When I'm at 100 and I draw down to 50, now I need 100% gain to get back to even. So the cost of that volatility is massive. Like, to catch that up is, is really big. And so what we found, and I think you guys agree with this, is like alternatives bring that volatility down. We We don't see the same drawdowns when we have a nice allocation to alternatives in the mix. And so it's like, all right, great. Let's lean into that because it's too expensive not to, because the drawdown is just so hard to come back from.
