Long-horizon investors have an edge. They can ride out short-term fluctuations in risk premiums, profit from periods of elevated risk aversions and short-term mispricing, and they can pursue illiquid investment opportunities. The turmoil we have seen in the capital markets over the last decade has increased the competitive advantage of a long investment horizon.Unfortunately, the two biggest mistakes of long-horizon investors—procyclical investments and misalignments between asset owners and managers—negate the long-horizon advantage. Long-horizon investors should harvest many sources of factor risk premiums, beactively contrarian, and align all stakeholders so that long-horizon strategies can be successfully implemented. Illiquid assets can, but do not necessarily, play a role for longhorizon investors, but investors should demand high premiums to compensate for bearingilliquidity risk and agency issues.

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