Alternative investments, or “alternatives,” are investments in any asset class other than stocks, bonds, or cash. The term covers a broad range of assets, from private equity, venture capital and real estate, even rare wine or stamps. Institutional investors have relied on alternative investments to diversify their portfolios for decades. During a recent study of 500 institutional investors ( Natixis), 71% thought the returns offered by alternative investments made them worth the potential liquidity risk, and a majority of those surveyed planned on increasing their allocation of alternatives.
Because alternatives tend to behave differently than traditional stock and bond investments, adding them to a portfolio should provide broader diversification, enhanced returns, and increased income levels. David Swenson, Chief Investment Officer of the Yale Endowment ($34.1 billion as of June 30,2020) created what is known as the Yale Model, which has produced returns of nearly 14% annually, consistently outperforming the major averages. The portfolio has had up to 43% allocated to alternatives such as real estate, venture capital, and private equity, with the income producing real estate portion having exceeded 20%.
Having experienced a variety of market/economic cycles over the past 30 years, we have found that certain asset classes are more suited to specific market cycles. As a private, independent firm, we can quickly adjust our strategy and allocate capital to specific asset classes poised to outperform in any given environment. To that end, we are currently focusing on multifamily real estate and late stage, pre-IPO venture opportunities.
Acuity Partners is here to help give individual investors access to best of breed, proprietary, institutional quality alternative investments. We look forward to discussing your short-term goals and long-term financial plan, to help you build a portfolio of alternative investments best suited to your individual needs.