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this post was submitted on 22 Aug 2023
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It's a bit complicated.
The CEO and the other shareholders aren't the same.
For the CEO, it's a good way to diversify since they can't diversify the normal way.
For the regular share holders it's a way to diversify but it's not as good as being able to buy and sell the individual components.
I'll skip a lot of the math but the upshot is that their Sharpe Ratio (expected return divided by risk) is higher if they do their own diversification than if they buy one company that tries to diversify within it.