Adding Alternatives Can Help Provide Greater Diversification
Private Equity / Venture Capital
Commodities & Managed Futures
As is mentioned in our “Learn About Alternatives” video below, 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 (like stocks) 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.
Benefits of Alternative Investments
- Not correlated to the public equity
- Generally not impacted by stock market movements
- More directly tied to the investment and its business performance (direct ownership)
- Greater tax benefits as a result of direct ownership (direct tax benefit)
- Many alternatives have a cash flow component that is directly passed through (strong income)
What Are Alternative Investments?
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.
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.
Also sometimes referred to as “private loans”, 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.
Oil & Gas Partnerships
The federal government has long incentivized the production of domestic energy through special tax breaks in the tax code. Even today with the discussion of lessening our carbon footprint and reducing our reliance on “fossil fuels”, we are an economy that will continue to depend on oil and especially natural gas (the cleaner of the two) until such time that a reliable, affordable alternative is available. Direct ownership in natural gas producing wells can provide investors with streams of income for long periods of time and direct tax benefits to help in their tax planning.
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 commodities, hedge strategies, 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.