Alternative Investments

The Alternative Investing Summit will bring together trustees and representatives of institutions as well as money managers and consultants to explore the roles of alternative opportunities and strategies. As a strategy, alternatives offer investors a method to obtain the returns they require and break the paradigm of the 60/40 rule, however not all alternatives are the same nor do they come without certain risks. Participants and delegates of this alternative investment conference will investigate a range of critical investment issues, including discussion of the risks and benefits of various asset classes and investment vehicles such as hedge funds and private equity, examining means of cutting costs associated with implementation of absolute returns strategies, reviewing the future of commodities and surveying the landscape of emerging international markets. With the current struggle of obtaining these returns, the question of fees has become of particular relevance, especially within the field of alternatives as investors measure their risks v. rewards. We will also look into impact investing as a way of obtaining returns that are socially responsible as well as many issues involved with fund management and the importance of education for trustees and other investment officers.

The label "alternative" describes a nebulous investment class to many investors, especially those in the institutional world who have strict ethical and fiduciary obligations to their organizations. However, pursuing alternative investments is essential to maximizing returns while maintaining proper asset allocation in plan portfolios of endowments, foundations, family offices, and public and corporate funds.

 

 

ALTERNATIVE INVESTMENTS

“Through the use of non-correlated sectors of the financial markets such as Real Estate, Commercial Credit, Equipment Financing and Energy and Power, we seek to diversify risk and minimize volatility.”

Over the last decade, investors have experienced extraordinary volatility in the traditional stock and bond asset classes. The current economic environment of low growth, historically low interest rates and a close correlation between asset classes has led our investment team to integrate alternative investment strategies. Our goals are to:

  • Maximize portfolio income
  • Reduce overall portfolio volatility
  • Reduce risk through greater diversification and low-to-negative correlation
  • Preserve and grow wealth

Meanwhile, the traditional method for reducing risk in portfolios (namely, decreasing stocks holdings and increasing bond allocations) may no longer work as effectively in the current environment as they did in the past.  Long term interest rates, which peaked in the early 1980s have subsequently declined to historically low levels.  In the current environment bond investors are receiving very little income relative to the significant duration (price) risk embedded in fixed rate bonds in the event interest rates rise in the future.

And, traditionally “safe” investments such as FDIC-insured bank products like CDs are paying less than historic rates of inflation, which results in a real loss of purchasing power over time.

The current global economic environment of low growth, historically low interest rates and a close correlation between asset classes has led our investment team to integrate alternative assets and strategies (collectively referred to as “alternative investments.”)

 

While the following list is not exhaustive, it includes the primary category of alternative investments under which most assets and strategies can be classified.

*This is a sample of the kinds of investments and sponsors but does not necessarily reflect any specific past, current, or future investment.

The cost structure, liquidity, strategies, valuation, terms and features of hedge funds are delineated in private placement memoranda.  Risk and return potential vary by sponsor, offering, and overall market and economic conditions.  Past performance is no guarantee of future returns. 

Alternative investments are more complex than traditional investment vehicles and can have cost/fee structures, valuation methodologies, liquidity limits, unique strategies, and a variety of risks that may be unfamiliar to many individual investors.  Some invest in illiquid assets, which can make them difficult to exit and price on a regular basis.  Some strategies involve leverage which can magnify gains or losses.

A trusted advisor, acting in a fiduciary capacity, is an essential business partner who can help determine the mix of investments that may be right for you.

Contact us today to learn how our strategies can benefit you.

 

Private equity has long been a significant component of highly esteemed institutional investors’ asset allocation due to historical outperformance of public markets over long time periods.

It has traditionally not been accessible to individual high net worth investors due to accreditation requirements, high investment minimums, and capital lock-up periods for long time periods between inception and an exit.

The cost structure, liquidity, strategies, terms and features of private equity offerings are governed by prospectus. Risk and return potential vary by sponsor, offering, and overall market and economic conditions. Past performance is no guarantee of future returns.

Alternative investments are more complex than traditional investment vehicles and can have different fees and cost structures. They often invest in illiquid assets, which can make them difficult to exit and price on a regular basis. Some strategies involve leverage which can magnify gains or losses.

Private equity may provide comparatively high total returns over time with a low correlation to traditional stock and bond investments, which may provide useful diversification in client portfolios.

A trusted advisor, acting in a fiduciary capacity, is an essential business partner who can help determine the mix of investments that may be right for you.

Our strategic alliances provide qualified purchaser[1] clients access to the world of private equity funds.

The ability to offer diverse private equity offerings with relatively low minimums enables us to optimize the risk and return parameters for each client’s portfolio to achieve his/her objectives.

Why invest in PE?

5 Key Questions to ask about PE
 

Contact us today to learn more about REITs

[1] To summarize the requirements under section 2(a)(51) of the Investment Company Act of 1940, a qualified purchaser is a person with not less than $5 million in investments. For a complete definition of Qualified Purchaser, please see Title 15 U.S.C. Chapter 2D, Sub Chapter I, Section 80a-2(a)(51), which is publicly available at www.gpoaccess.gov/uscode/browse.html

 

why invest in PE? link to:  https://static.fmgsuite.com/media/documents/ecbbf429-ea9e-4602-ae96-a993ad2b9605.pdf

5 key questions to ask: https://static.fmgsuite.com/media/documents/b20d3fed-f73e-48c0-90bb-9440284fcd95.pdf 

 

 

Historically, banks have played a large role in providing financing to firms for asset acquisitions, trade financing, growth strategies, etc.  Following the global financial crisis, increasing global regulatory requirements (Dodd-Frank, Basel III, etc.) and a historically low interest rate environment have compressed profit margins, and dramatically altered the business model of banking.

In this environment, Business Development Companies (BDCs) and other non-traditional lenders are taking an increasing role in providing capital (typically on a floating rate, senior secured basis) to private middle market American companies.  This has created new investment opportunities as well as risks.

Traditional banking products (checking accounts, savings accounts, and Certificates of Deposit) feature constant share prices, varying degrees of liquidity, relatively low interest rates, and FDIC insurance (up to regulatory limits) to protect depositors.  Investors can also purchase the stock or bonds of these institutions, which carry varying degrees of risk and return potential.

Investors in business development companies and other emerging lenders can either invest in the equity of the firms or in the bonds issued by such firms (and, in the case of online peer-to-peer lending, directly in certain lending transactions).  Due to the regulations governing BDCs as pass-thru entities, BDCs tend to offer higher monthly distributions to equity owners than is usually offered by banks, but this also limits the amount of retained capital such firms can use to grow their businesses. As equity (whether listed and traded on a stock exchange or non-traded) it is not subject to FDIC insurance and share prices can be volatile.  In general, equity prices fluctuate with the performance of the firm’s loan portfolio, the firm’s earnings, and overall stock market and economic conditions.  Similarly, BDC bonds share many risk/return characteristics with other traditional fixed rate securities.  Some investment vehicles are more liquid than others.

The cost structure, liquidity, strategies, terms and features of closed end investment offerings (typically, non-traded equity) are governed by prospectus.  Risk and return potential vary by sponsor, offering, and overall market and economic conditions. Past performance is no guarantee of future returns.

Alternative investments are more complex than traditional investment vehicles and can have different fees and cost structures.  They often invest in illiquid assets, which can make them difficult to exit and price on a regular basis. Some strategies involve leverage which can magnify gains or losses.

BDCs and other non-traditional lenders may provide relatively high income with a low correlation to traditional fixed rate debt and may provide useful diversification in client portfolios.

A trusted advisor, acting in a fiduciary capacity, is an essential business partner who can help determine the mix of investments that may be right for you.

 

 

Equipment Leasing partnerships provide capital to firms in equipment-intensive industries via collateralized leases and loan instruments.  Partnerships operate for a period of time before the assets are sold or loans mature and proceeds distributed to investors.  A portion of interim distributions may be non-taxable or tax-deferred due to depreciation and other partnership expenses.

The cost structure, liquidity, strategies, terms and features of closed end investment offerings (typically, non-traded equity or partnership units) are governed by prospectus. Risk and return potential vary by sponsor, offering, and overall market and economic conditions.  Past performance is no guarantee of future returns. 

Alternative investments are more complex than traditional investment vehicles and can have different fees and cost structures.  They often invest in illiquid assets, which can make them difficult to exit and price on a regular basis.  Some strategies involve leverage which can magnify gains or losses.

Equipment Leasing funds and other non-traditional lenders may provide relatively high cash flow distributions (which may include return of capital during the life of the offering) with a low correlation to traditional stocks and bonds, which may provide useful diversification in client portfolios.

A trusted advisor, acting in a fiduciary capacity, is an essential business partner who can help determine the mix of investments that may be right for you.

Equipment Leasing partnerships provide capital to firms in equipment-intensive industries via collateralized leases and loan instruments.  Partnerships operate for a period of time before the assets are sold or loans mature and proceeds distributed to investors. A portion of interim distributions may be non-taxable or tax-deferred due to depreciation and other partnership expenses.

Risk and return potential vary by sponsor and offering. These investments can provide income, stability, and diversification to client portfolios.

https://youtu.be/0mW5Q_py3cw

Learn more about Equipment Leasing partnerships: