Abundant data suggest that a recession isn’t just around the corner, but expectations of near-term economic and market doom have many individual investors fearful for the fate of their portfolios.
Managing clients in this state is a difficult advisory challenge. But what if you could adjust client portfolios in a way that might assuage their fears, provide some protection in a slowing market, and still position them well if the bull continues? Sheaff Brock Managing Director Dave Gilreath shares potential opportunities in a recent article for Financial Advisor magazine.
An established investment advisory firm, Sheaff Brock manages the wealth of high-net-worth individuals using a “core and satellite” investment approach.
The core and satellite strategy combines active and passive investing. The core involves investing passively in asset classes that follow indexes with the aim of replicating overall market returns, while the satellite aspect involves actively investing a percentage of managed assets with the goal of outperforming the market.
Many investors often wonder which is the better approach to investing, passive or active. Passive investing focuses on the long term. Investors buy into an index fund that tracks a major index such as the S & P 500. These funds deliver returns that mirror the overall index performance.
Active investing is quite different. Investors focus on shorter-term trades with the goal of achieving higher-than-market returns. It involves much deeper analysis into qualitative and quantitative data to take advantage of trends, irregularities, and anomalies in the markets.
Through the core and satellite strategy, investors can enjoy the best of both investment approaches.
Sheaff Brock is a registered investment advisory firm located in Indianapolis, Indiana. While offering a variety of traditional investment portfolio options, Sheaff Brock also offers alternative portfolios.
While the major US equity markets continued their strong performance into the first quarter of 2017, there are indications that alternative investment asset classes are growing in popularity. In fact, according to Preqin’s Investor Outlook: Alternative Assets, H1 2017, the hedge funds and the private capital market are the largest they have ever been at a combined $7.7 trillion assets under management.
Investment in alternative assets grew by more than $300 billion in 2016, with Preqin attributing this to further diversification by existing investors rather than new inflows of capital. In the Investor Outlook, Preqin outlined six alternative investment classes and listed the proportion of institutional investor involvement in each one:
1. Real Estate - 61 percent of institutional investors have a portion of their portfolio invested in real estate
2. Private Equity - 57 percent
3. Hedge Funds - 51 percent
4. Natural Resources - 40 percent
5. Private Debt - 37 percent
6. Infrastructure - 36 percent