Why Investors Utilize Alternative Investments

Alternative investments are non-traditional assets not normally included in a vanilla 2-Dimensional stock-bond portfolio.

Essentially any investment, other than a stock, bond or cash, can be considered an alternative investment but some of the most common are real assets, private equity and hedge strategies. 

By allocating alternatives to your portfolio you are creating a 3-Dimensional portfolio based on the Endowment Investment Philosophy®, which will expand your diversification and may enhance long-term risk-adjusted returns.

Types of Alternative Investments

Alt invest pie-chart pic

Real Assets

Real assets have an intrinsic value due to their substance and historically have offered an 'inflation hedge' to an investor's portfolio. The asset category includes real estate, precious metals, commodities and other tangible resources.

Private Equity

Private equity is simply ownership in a company that is not publicly listed or traded. Over 99% of US companies are privately held, therefore, private equity should be a cornerstone of a globally diversified portfolio.

Hedge Strategies

Hedge strategies are designed to perform inversely to the overall market. The idea is to 'hedge' the market to provide downside protection. There are three primary hedge strategies: event driven, relative value/arbitrage and directional.

Benefits of Utilizing Alternative Investments

1

Diversification

Alternative assets with a low correlation to traditional stocks and bonds can provide additional diversification to your portfolio. "Diversification is the only free-lunch in finance" - Harry Markowitz
2

Enhance Returns

More exploitable opportunities for skilled managers. Private markets are less regulated and thus provide exponentially more investment opportunities compared to public markets.
3

Increase Current Income

An extended period of historically low interest rates has inhibited many investors from meeting their income needs. One of the most common cash flowing investments, real estate, is considered an alternative investment.
4

Longer Time Horizon

Since private companies are not required to report quarterly earnings, they can focus on long-term growth without being scrutinized every three months.
5

Illiquidity Premium

Illiquidity is often viewed as a disadvantage for an investment. However, historically speaking, granting managers the use of capital for long periods of time has produced an illiqudity premium (i.e. higher returns) over the long-term.
6

Reduce Volatility

Since alternative investments are non-correlated to traditional stocks and bonds, alternatives will help reduce your overall portfolio's volatility. Moreover, many alternatives are not listed on public exchanges so they do not fall prey to emotional market selloffs.

Alternative Investments Research

Alternative investments are a major aspect of the Endowment Investment Philosophy®. Learn more about alternatives here!

Learn More

FACT: You need 6X the risk to achieve a 7.5% return in 2019 vs 1989

54%

DID YOU KNOW…

The NACUBO (National Association of College and University Business Officers) representing approx. 800 universities reports the average university endowment allocation to alternative investments is approximately 54% (June 30, 2019).

Based on Callan’s Capital Market Expectations. Past Performance does not Guarantee Future Results. Source: Callan LLC

Some of Our Professional Partners & Alternative Investment Managers

Endowment Wealth Management provides access to institutional quality independent alternative investment managers. Access to these managers depends on both availability and minimum investment qualifications.

Discuss the Benefits of Adding Alternatives to Your Portfolio

Schedule your free wealth consultation where we will evaluate your current portfolio structure and determine how alternative investments can benefit your long-term Family Wealth Plan.

We guide you through the entire process – making it seamless and simple.

  • Call us at 920-785-6010, or
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The information on this page is for informational purposes only and should not be considered personalized investment or tax advice.  Investing involves risks, including, but not limited to long-term investing risk and potential loss of capital.  Endowment Wealth Management is not making any specific recommendations that investors should or should not participate in investments.  Investors should always consult with a registered investment adviser and tax accountant to determine if any particular investment and its corresponding tax impact is appropriate for their personal circumstances. Not insured. Not Guaranteed. May Lose Money.