Are Alternative Investments as New as We Think?
Top advisor previews some of the insights he'll share at upcoming WP Advisor Connect event. In an time of uncertainty and past the first major downturn during the democratization of private assets, news and advice about alternative investing is swirling around the industry. To give advisors a clear picture of the alts landscape at the end of 2020, WP is focusing its next advisor connect on alternatives.
On September 24th, WP will be hosting the next in its series of virtual connect events to ask the top minds in Canadian alternative investing some of the industry’s burning questions. Top advisors, industry advocates, fund providers, and analysts will share their insights about alts and help us determine if the 60/40 mix is dead, what alts options exist for retail investors, and how alts can potentially protect your clients ahead of greater market uncertainty. One of those speakers, Arthur Salzer CEO and CIO of Northland Wealth Management, shared some of the insights he’ll be bringing to the event.
“What we’ve been saying for a long time at Northland is that we should be looking at the new 60/40, and that means 60 per cent public markets and 40 per cent non-public markets and alternatives,” Salzer says.
“We’ve seen a situation where interest rates and inflation have come down in the last 25 years and now we’re at an inflection point where getting additional returns and diversification from traditional fixed income is going to be problematic at best and disastrous at worst.”
While alts have long been the purview of the accredited investor, Salzer says more and more options exist for retail investors to come closer to his 60/40 mix. He says gold can play a serious role for investors in the current environment considering the likely years of money printing we’re going to see from governments. Bitcoin, too, he says is a totally uncorrelated and unrestricted asset that can drive performance if used right.
Salzer also wants to flip the script on alts vs. “traditional” investing. He notes that buying gold or buying into private lending has an investment history going back millennia. Where ancient Romans hoarded gold and medieval Venetian merchants loaned money for trade voyages, the idea of a stock exchange is only about 300 years old. In Salzer’s view alts investing and private assets should not be considered all that novel in the broad sweep of economic history.
Salzer says one of the biggest opportunities for alts investors is in private debt. He sees huge spreads in private debt. If an advisor can find best in class lenders that can underwrite and lend money properly and that know how to collect when difficulties arise, the advisor can find a true winner for their client in an age when “traditional” fixed income is so unattractive.
Salzer says that even advisors skeptical about alts should get informed as best they can. They should take opportunities to learn, even if it’s just to fully understand why they’re saying no. For an advisor, educating yourself equips you to better educate your client and have an informed discussion about why alts may or may not work for them. He says the advisor connect event is an opportunity for advisors to gain that knowledge.
“It's always good to know what other advisors are thinking or doing,” Salzer says. “It's not always about agreeing with them. It can be about disagreeing with them or saying I think they're on the wrong track. It could be being exposed to ideas that you haven't considered before. So the more knowledge that you have, the better you can serve your clients. Knowledge is power.”