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b'In Episode 51, we welcome Mark Kritzman. Per usual, we start with Mark\\u2019s background. He tells us a bit about his 40-year career in investing, leading to Windham, where he focuses on asset allocation and risk premia strategies.\\nBut it\\u2019s not long before the guys jump in, starting with Mark\\u2019s 7th book, A Practitioner\\u2019s Guide to Asset Allocation, which will be coming out soon. Mark describes the process of asset allocation, starting with the basics, then taking us a layer deeper, discussing asset allocation as a way to balance the goal of increasing wealth while minimizing drawdowns. In essence, you need to identify the asset classes you want, evaluate their expected, long-term returns, then estimate the volatility of each and \\u2013 just as importantly \\u2013 estimate the correlation between the asset classes. With all this, you then find the particular allocations that give you the highest return for the same level of risk \\u2013 the efficient frontier.\\nNext, the conversation takes a turn toward investing fallacies, including the idea that asset allocation drives more than 90% of performance. Mark tells us there are some flaws with this idea, then explains in detail. Another fallacy discussed is that of time-diversification \\u2013 the assumption that investing over the long-term is safer than investing over shorter periods. Again, Mark provides details that call into question this belief.\\nThe guys then get into investing in illiquid assets, and how to appropriately structure them in an asset allocation. It can be hard to maintain a balanced portfolio consisting of illiquid assets. Mark\\u2019s approach is to treat liquidity as a shadow investment. In essence, you attach a shadow asset as well as a shadow liability to the appropriate parts of the portfolio. You\\u2019ll want to listen to this part of the episode for all the details.\\nThis dovetails into hedge funds, since hedge fund investing can also be illiquid. Meb asks how Mark thinks about hedge fund investing, and given limited information, is an investor\\u2019s only recourse to be able to pick the best managers? And if one doesn\\u2019t have that ability, should he/she just stick with investing in the S&P?\\nMark has a great answer about how most of the historical premium of private equity over public equity can be attributed to the sector exposures of private equity funds. So investors can build a portfolio of public sector ETFs in a way that can approximate much of the hedge fund sector allocation. You\\u2019re probably going to be surprised at just how much of the premium of private equity over public equity doing this which would have delivered to an investor.\\xa0\\nAs usual, there\\u2019s plenty more in this episode: the role of fees and taxes\\u2026 the concept of \\u201cturbulence\\u201d\\u2026 the absorption ratio, and how we can use it to evaluate risk\\u2026 and lastly, what Mark\\u2019s most useful idea is for listeners.\\nWhat is it? Find out in Episode 51.\\nLearn more about your ad choices. Visit megaphone.fm/adchoices'