Some financial advisors believe now is a good time for certain investors to dive into alternative assets such as private equity, according to news reports.
For starters, the current market environment has created opportunities in which alternatives are particularly attractive, the Wall Street Journal writes. And given the disruptions in equities and bonds, alternatives are a good option for diversification, according to the newspaper.
“People think the stock market is a gigantic ocean and it’s really a six-inch-deep lake,” says Frederick Hubler Jr., president and chief wealth strategist of Phoenixville, Pa.-based Creative Capital Wealth Management Group , who specializes in alternative investments, according to the Journal.
Alternatives, however, are best suited for accredited investors as many such products require minimum investments of around $10,000 to $50,000, charge high management fees, require investors to commit for the long term and have little publicly available information about them, the newspaper writes.
But for those who are suited to alternatives, private equity, for example, presents an opportunity because it can get investors access to new venture projects early in their life cycle in tech infrastructure, capitalizing on lessons learned during the pandemic, says Juan Pablo Villamarin, senior research manager at Intercontinental Wealth Advisors, according to the Journal.
And because private equity has “more flexibility” when it comes to liquidity — as it only promises liquidity at specific times — it means investors can tap assets for a low price, with the possibility of them growing long-term, says Jason Blackwell, chief investment strategist at the Colony Group, according to the newspaper.
Villamarin also sees private credit, issued by non-bank lenders, as a good opportunity in certain areas, as companies facing liquidity problems turn to alternative lenders and banks sell nonperforming assets to “opportunistic and well-connected private-credit managers,” the Journal writes.
Blackwell also points to distressed debt and real estate as two areas with “interesting opportunities,” according to the newspaper. And Patrick Healey, founder and president of Caliber Financial Partners in Jersey City, N.J., points to real estate properties such as cellphone towers, data centers and self-storage facilities as particularly attractive, the Journal writes.
However, Michael Finke, professor of wealth management at the American College of Financial Services, warns that the comparative value of alternatives, over the long run, is debatable, according to the newspaper. And most individual investors, Finke says, will do well investing in more traditional assets, according to the Journal.
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