Capital Allocation

Allocation is the one decision an owner cannot delegate away. Everything else, from manager selection to reporting, is downstream of how much goes where, and why.

The literature obsesses over expected return. Serious allocators spend at least as much time on the shape of the downside, on liquidity they will actually need, and on the correlation that only reveals itself when it is least welcome. Concentration builds most fortunes and ends a good number of them; the discipline is knowing which position you are in.

This topic looks at allocation as a system of constraints rather than a search for the best idea: sizing, liquidity, reserves, and the quiet power of not being forced to sell.