The document discusses the hidden costs of leverage that were revealed during the financial crisis. It summarizes that institutional investors had been reducing investments in equities and increasing investments in bonds, hedge funds, and private equity seeking higher returns. However, these alternative assets were highly correlated and dependent on continued availability of cheap credit and leverage. When credit markets seized up in 2008, nearly all asset classes declined simultaneously. The crisis demonstrated that diversification benefits had been overstated as leverage had increased risk across the financial system.