In a financial ecosystem saturated with jargon, product proliferation and marketing spin, Simon Scott of Genium Investment Partners is on a mission to bring order to chaos. Speaking at The Inside Network’s recent Alternatives Symposium, the senior analyst articulated a cogent, structured approach to research, due diligence and portfolio construction that prioritises clarity over complexity, and substance over spin.
With a quarter-century of experience across Morningstar, Standard & Poor’s, and Macquarie, Scott now leads research at Genium, a firm known for its curated, invitation-only research platform and bespoke client portfolios. Crucially, Genium doesn’t run its own product. “We’re not incentivised to push anything. The list we give to advisers is incredibly tight, and that’s deliberate,” Scott said.
His preferred entry point to alternatives isn’t via asset class labels or marketing narratives, but through risk factors. “What am I trying to seek with an alternative?” Scott asked rhetorically. “I’m trying to modify, diversify or eliminate some sort of risk factor.” From this starting point, he lays out a three-dimensional framework that organises strategies not by asset class but by function: modifier, diversifier, or eliminator of risk.
Modifiers, he explained, might include long-short strategies in equities or direct lending in fixed income, offering the same risk exposures as traditional assets but with reduced intensity. Diversifiers, on the other hand, represent a conscious trade-off, taking on a different risk in exchange for leaving behind another, such as in risk premia strategies. Lastly, eliminators are designed to fully neutralise a risk factor, incorporating volatility strategies, tail hedges or convexity trades.
This “cube” model simplifies portfolio construction for advisers, especially when the end-client is a high-net-worth investor or family office with a limited appetite for complexity. “We don’t need to worry about what label we’re calling the strategy,” Scott said. “Just make it a very clean, simple cube, even if it’s 10 o’clock on a Monday”.
Beyond classification, the structural appropriateness of an investment vehicle looms large in Scott’s due diligence process. He is candid about the misalignments he sees. “The structure’s got to be appropriate for the assets, not for the person marketing the product,” he said. He noted, for instance, that at times local structures are more aligned to the needs of the designer rather than the end investor.
Scott cautioned advisers to look past surface-level comparisons and interrogate what sits underneath. For example, the allure of “mandated liquidity” in certain vehicles may obscure the incompatibility of that structure with underlying illiquid assets. Similarly, vehicles designed for easy multi-jurisdictional sale might not offer the right alignment with the investment’s risk-return profile.
The next layer of scrutiny is managerial capability. Scott sees a convergence between two camps: large, traditional asset managers expanding into alternatives, and niche, specialist investors crossing into institutional-grade operations. “The big players have fantastic pipes, systems, compliance, infrastructure, but they’re new to investing. The boutiques have the investing chops but lack the same governance rigour,” he noted. Successful investment, then, lies in finding the right balance of operational robustness and genuine subject matter expertise.
Due diligence must follow the money, literally. “Look at where the cheque goes. What are the roadblocks? Who are your co-investors?” Scott advised. The diversity of global investors, especially in terms of time horizons and yield expectations, introduces a host of complexities. “Guaranteed, it won’t be the people in this room. It’ll be 25 other markets with totally different definitions of ‘long term’,” he warned.
Scott’s commentary also touches on the emergent complexity in secondaries and liquid alternatives. He voiced scepticism about the pricing inefficiencies in secondary markets. “I get the conceptual idea, but I don’t get why high-quality assets need to be so cheap in a functioning market,” he said. His comments reflect a broader caution about herd behaviour and the eagerness to chase narrative trends without enough grounding in fundamentals.
Liquid alternatives, meanwhile, offer a fascinating paradox. “We’ve got some of the longest-standing liquid alts managers presenting, trading the most liquid assets in the world. Yet all the focus is on everything else,” Scott remarked. He suggested that the industry’s preoccupation with opaque, illiquid strategies might be overlooking the value and transparency offered by liquid alts.
Perhaps most telling is Scott’s granular view on what makes a portfolio truly diversified. “We’ve got 55 direct lending, middle-market managers in that modifying sleeve,” he revealed. But Genium’s approach is not to keep stacking on more of the same. “We’re looking at asset-backed, at aviation, transport, rights and royalties. The goal is diversity away from ‘just more corporate loans’”.
For advisers, the takeaway is that real research is bespoke, discriminating and ultimately designed to be used. Scott’s framework doesn’t just sort investments, it helps advisers construct narratives that resonate with clients, ones based on function, not fashion. In a world where label inflation is rife and complexity often masquerades as sophistication, his message is refreshingly grounded.
In an industry still grappling with how to integrate alternatives in a post-Hayne environment, Scott’s approach sets a high bar. It reminds advisers that sound research begins with asking the right questions, not about performance first, but about purpose.