Technology Gains and a Growing Market Bring New Importance to Alts
October 24, 2022 | John Rickman | Altigo
The following interview with Altigo co-founder Mat Dellorso first appeared in the September 2022 issue of Real Assets Advisor. In this interview, Mat shares his belief that alternative investments could comprise a bigger part of every investor’s portfolio, and his thoughts on what more can be done to make that happen.
You say that alternative investments could comprise at least 10-20% of a high-net-worth investor’s portfolio. Why is that?
Alternatives are going more mainstream. They’re becoming better structured with investor alignment and outcomes in mind, and the best investors in America—your endowments, your pensions, your large institutional investors—have always used alternative investments to outperform retail investors because they’re able to invest long term, find unique opportunities, and not just be beholden to stocks and bonds.
For many investors and advisers, alternative investments were typically just categorized as any investments other than traditional stocks, bonds, or mutual funds. I think the word “alternative” is a misnomer because these are investments that are needed. Many investors in America know and understand real estate and own a home, so the trend is that more investors are realizing that alts can play a meaningful and important part of an investment portfolio. Alts, as we think of them at Altigo, provide the potential for diversification, non-correlation with public market returns, growth, and income.
I think the timing for alts is good now because of the recent volatility in the financial markets. For the first time since 2008/2009 you’re seeing a market where it’s hard to find a good place for your money—the value of equities is declining broadly, fixed-income prices are trending lower as yields rise, and the value of cash and equivalents is rapidly eroded by inflation, and the crypto bubble has begun to deflate.
Commodities, like oil and gas, are doing well. Real estate hasn’t declined as fast as your public equity markets and bond returns. So, having some alts in your portfolio right now could benefit retail investors. And these alternative investment products are becoming more available, which is another trend making alts timely and sensible.
Alternative investments deserve to be a more meaningful part of a high-net-worth investor’s portfolio than just the traditional 60/40 growth-and-income model. A goal of 10-20% is good for sophisticated investors who understand the risks and can weather longer-term investment horizons.
