Why Alternatives

As was mentioned in our "Learn About Alternatives" video, the primary purpose of investing in alternatives is to increase diversification and reduce correlation in your portfolio.  That is a technical way of saying we want to invest in more opportunities that perform independently of what other public asset prices are doing.  In times of panic or market turmoil, it may help to have investments that act in a different way when all your other investments seem to act in lockstep. 

 

Adding Alternatives Can Help Provide Greater Diversification

 

A Quick Visual On Correlation

 

 

Now in practice assets rarely (if ever) have a perfectly positive or negative correlation, but in certain times of distress, we have seen public assets move closer to the +1.0 correlation. This is important because from a risk management perspective, losses suffered when you thought you were diversified with stocks, bonds, and cash may be difficult to recoup, and could adversely affect your ability to reach your goals.  As shown below, a hypothetical 33% loss requires a 50% positive return to get the investment back to square one.

 

 

 

So what are these "alternative" types of investments and how do I get exposure?

Venture Capital                                                                          

One of the greatest ways to build wealth in this country is to be an entrepreneur and build a great company.  For those that can't, the next best thing may be to invest in that entrepreneur that can.  Venture capital is investing in early-stage, innovative businesses looking to disrupt an industry.  With our partners at iSelect Fund, we help clients manage their own venture portfolio in areas such as Food & Agriculture, Healthcare, Resource Efficiency, and B2B Technology.

 

 

 

Real Estate

This asset class has a wide array of opportunities and can offer an investor benefits from stable cash flowing properties to pure equity growth through development.  Whether you are seeking single-family homes, multi-family apartments/condos, senior housing, hospitality, storage units, or even land entitlements, adding passive real estate to a portfolio has often proven to assist in lowering portfolio volatility over the long term.  See a few of our partners below.

 

 

 

 

 

Cantor Fitzgerald

 

Shopoff Securities Logo

 

 

Private Placement Debt

Also sometimes referred to as "non-traded bonds", private debt is not too dissimilar from corporate bonds in that they are an investment whereby you loan a company money for a stated term at a stated interest rate.  Being that they are private, though, they are afforded flexibility to be structured in many different ways, have different filing and registering requirements than public bonds, and typically do not exchange hands between investors.  For this illiquidity, however, investors are paid a premium to other fixed income offerings.

GWG_Logo

logo

 

GK Real Estate Logo

 

Others

Much like you build out the equity side of your portfolio with many "classes" of stocks (small, mid, large, international, emerging market, etc.) there are many other alternative opportunities.  Whether that be commodoties, hedge strategies, oil and gas partnerships, private equity, global infrastructure, or others, we can run through all that we have to offer and build the right portfolio to give you the exposure to alternatives that suit you.