The end of last year and the beginning of this one have seen a fair share of volatile shake-ups.

The current climate resembles a power play between a bearish stock market and bullish net gains. With that, these erratic “states of America” have ceased the traditional reliance on stocks and bonds. Instead, a tertiary player that’s been around for quite some time has gained lauded attention – alternative investments.

It used to be sought after by only a small number of investors. However, with a turbulent political system, employment spikes, and deviated equity, the alternative is becoming a potential option for certain astute investors.

“In the face of ‘market mania,’ pundits often relate risky capital to short-lived solutions,” says Jeff Sica, president of Circle Squared Alternative Investments. “The truth is, wealth management moves shouldn’t set off reactive fire alarms. Diversification in the hands of a professional should, in fact, afford less fluctuation and more synchronistic returns. And where there’s congruency, there’s currency.”

Rolling the Dice: Go Low, Stay High, or Meet in the Middle

Perhaps we should take our cue from self-made millionaires, Mark Cuban and Warren Buffet.

Don’t panic sell.
Don’t watch the markets too obsessively.
And maintain your long-term perspective.

It’s a sentiment that’s fallen on deaf ears as 40 percent of Americans admit to being “anxious” about stock market volatility, a potential threat encroaching on their retirement. [1]

Just the same, high-net-worth investors should counter the downward spiral of cash flow and ambivalence. Putting new money into holdings that help diversify their portfolio, and avoiding over-concentration in one area, can be paramount.

The appeal of alternatives is simple: everything from real estate ventures to hedge funds carries the potential for downside protection during unstable economic times. Investors can level the playing field being less dependent on fixed means and more pliable during significant deficits. Like the game of chess – strategy not stagnancy – can help leverage the wins and mitigate losses.

The Stock Market vs. The “Stark” Market

Here are a few examples of alternative investments that have weathered fiscal shifts:

Non-correlated Assets   

These alternative investments generally do not move in the same direction as the markets. Things other than publicly traded vehicles like tapping into farmland and cell phone towers can piecemeal allocation. [2] Alternatives tend to have low correlations to stocks and bonds, which implies that they may play the useful role of diversifying your portfolio. [3]

Private Equity

Some of the more popular alternative asset classes among private banking clients include distressed assets, infrastructure, and structured credit, as well as investments related to philanthropy and ESG (environment, social and governance) themes. A survey by Scorpio Partnership reveals high net-worth individuals hold up to 16.3% of their portfolio in private equity and private real estate funds. [4]

Market-neutral Funds 

For a fund that doesn’t move in sync with the S&P 500, a market-neutral fund, such as a merger-arbitrage fund, can be a keystone investment. These funds invest in stocks of already announced takeover and merger targets, in hopes of capturing last minute appreciation before a deal reaches a conclusion. [5]

There are many ways to invest in the real economy. Check with your financial advisor about the strategic moves that best fit your long and short-term goals. For Circle Squared Alternative Investments’ approach to wealth management and financial security, be sure to reach out to our team of professionals for insights and “alternative” solutions.

 

 

Sources:

[1] (Carter, CNBC, 2018)

[2] (Konish, CNBC, 2018)

[3] (Estrada, Forbes, 2017)

[4] (Brandvoice, Forbes, 2018)

[5] (Huang, Kiplinger, 2018)

Investors should be aware of additional risks associated with alternative investments due to factors such as economic and political instability, regulatory requirements, increased volatility, illiquidity, higher management fees, lack of performance history, currency fluctuation, and differences in auditing and other financial standards and that these risks can be accentuated in alternative investments. Alternative investments may be suitable only to those who understand and are willing to assume the economic, legal and other risks involved.

The foregoing is not a complete list of the risks involved with alternative investments. You should thoroughly review all pertinent offering documents with respect to alternative investments with your financial, legal and tax advisors to determine whether the investment is suitable for you in light of your investment objectives and financial circumstances.

Circle Squared Alternative Investments, LLC (“CSQ”) is an SEC registered investment adviser with its principal place of business in the State of New Jersey. Registration does not imply a certain level of skill or training.  CSQ may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by CSQ with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration where the prospective client resides. For information pertaining to the registration status of CSQ, please contact CSQ or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).  For additional information about CSQ, including fees and services, send for our disclosure statement as set forth on Form ADV from CSQ using the contact information herein. Please read the disclosure statement carefully before you invest or send money.