“Why being ‘sophisticated’ isn’t always smart for investors”: AFR

A ‘sophisticated investor’ as one who is able to quantify risk effectively. But this is highly nuanced, since the investor also needs to be able to match this risk with their appetite and experience with investment complexity, along with an ability to appreciate if liquidity and liability match with the investment timeframe.

This is the real sticking point with the current measure of sophistication as it has little bearing on an investor’s understanding of risk, according to Alvia Asset Partners CIO Josh Derrington.

Many thanks to Aleks Vickovich for including CIO Josh Derrington’s recent comments in his article: “Why being ‘sophisticated’ isn’t always smart for investors”:

Josh Derrington, chief investment officer at boutique fund manager Alvia Asset Partners, also lists pre-IPO investments as an appealing wholesale-only opportunity. He singles out a position Alvia holds in Pure, a waste management product provider…

Derrington says an investor’s ability to select a winning asset has a lot more to do with their “experience and tenure” than their means.

“Why being ‘sophisticated’ isn’t always smart for investors”, Aleks Vickovich (AFR, Oct 15, 2021)