Endowments typically have significant allocations to “alternative strategies” which can play a role in diversification and long term portfolio growth.
Where appropriate, we too like to utilize alternative strategies for clients, usually in the rage of 10% to 15% of a portfolio. Today we are primarily focused on direct debt and real estate as well as low correlation equity trading techniques in some situations.
Alternative investments are usually less liquid investments but still invest in stocks, bonds and real estate as the underlying strategies. They can be desirable because of their ability to provide returns that are not directly correlated to financial market movements.
When we look at the overall “risk” allocations of endowments, they typically end up being around 70% true equity risk (alternatives, real estate, stocks, bonds, hedge, etc.). For most clients however, this risk allocation tends to be too high. Unlike endowments that technically have access to unlimited donations / funding for the next 100+ years, our clients do not have that luxury. Once work stops, there is no funding mechanism other than the current investments and liquidity to fund daily needs. For those reasons, we find that for most people, the sweet spot for the financial plan is generally in the 40-60% equity risk range.
If you’d like to learn more about this, you can read more here, or reach out to our experienced team.
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Mission Wealth is a Registered Investment Adviser. This commentary reflects the personal opinions, viewpoints, and analyses of the Mission Wealth employees providing such comments. It should not be regarded as a description of advisory services provided by Mission Wealth or performance returns of any Mission Wealth client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Mission Wealth manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
