A Comprehensive guide to Alts for Family Offices

November 20, 2023

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Recent trends reveal a growing inclination among family offices towards alternative investments, marking a shift in high-net-worth portfolio strategies. Data from Fintrix, for example, cites that evolution in the growing success of family offices is mainly driven by “long-term strategies and high allocations to alternatives.”

A 2023 report from Goldman Sachs saw Meena Flynn, Co-Head of Global Private Wealth Management and Co-Lead of One Goldman Sachs Family Office Initiative, share that she sees family offices exhibiting a “consistent approach to more aggressive allocations as they seek superior returns.”

This article explores how alternative asset classes are reshaping family office investment approaches, offering enhanced diversification and potential for higher returns in HNW portfolios.

Understanding Alts

Alts include a huge range of assets outside of stocks, bonds, and cash. Things like real estate, private equity, hedge funds, and increasingly, Merchant Cash Advances (MCAs).

The distinct characteristics of alternative assets include a lower correlation with standard markets and unique risk and return profiles. For family offices managing high-net-worth portfolios, alts are useful because they offer diversified risk management as well as the potential for higher yields.

The incredible variety of alternative assets spans tangible commodities to financial derivatives, which means family offices can use them to expand their toolkit for sophisticated portfolio construction.

A piggy banks with many coins around it for ‘The Rise of Alternative Investments for Family Offices: A Comprehensive Guide’ alts
Data shows family offices are increasing allocations to alts. Photo by cottonbro studio.

The Appeal of Alternative Investments to Family Offices

Alternative investments can be attractive to family offices due to their ability to diversify portfolios beyond the traditional market scope. These assets often deliver higher returns compared to conventional investments, making them an attractive option for family offices seeking to maximize their wealth.

Additionally, their low correlation with standard market movements can offer a hedge against market volatility. This factor often supports the long-term strategic goals of family offices of preserving capital whilst building wealth for the future.

This blend of benefits – diversification, enhanced returns, and risk mitigation – can make alternative investments a strategic fit for the sophisticated asset management goals of family offices.

Supervest’s MCA Notes: A Prime Example

Supervest offers both a 12-month and a 24-month Merchant Cash Advance (MCA) note.

The 12-month note offers a 10% target return, while the 24-month note offers 12%. Our Q3 report shows that we have successfully returned 100% of target yields to our investors. We charge no fees on these notes.

Our MCA notes embody the essence of alternative investing, providing family offices with options that diversify portfolios and yield substantial potential returns. Their structure, distinct from traditional market investments, can add a layer of financial resilience and opportunity for family offices looking to diversify their portfolios into alternative assets.

Hands holding a lightbulb for ‘The Rise of Alternative Investments for Family Offices- A Comprehensive Guide’
Diversifying into alternative assets could be your next bright idea. Photo by Anete Lusina.

Integrating MCAs into Family Office Portfolios

Integrating MCAs into a family office’s portfolio requires a strategic approach that balances traditional assets with these alternative investments.

MCAs offer diversification, potentially reducing the overall risk exposure while still providing opportunities for attractive returns. Family offices should consider the proportion of MCAs in their total portfolio to maintain a balanced investment mix.

Supervest aids this process with rigorous due diligence and risk mitigation strategies, ensuring each MCA deal meets the highest quality assurance criteria. This careful approach positions Supervest as a valuable partner in enhancing family office portfolios with MCAs as a novel alternative asset class.

Future Trends in Alternative Investments

The landscape of alternative investments is poised for significant evolution, with data indicating a substantial increase in allocation over the next decade. According to PwC, “Alternative asset classes – in particular, real assets, private equity, and private debt – will more than double in size, reaching $21.1 trillion by 2025, accounting for 15% of global AuM.”

This shift promises to impact family office investment strategies profoundly, encouraging a broader embrace of assets like private equity, hedge funds, and MCAs. As these alternatives gain traction, they’re set to become integral components in diversifying and strengthening family office portfolios, aligning with the demands of future financial markets.

What Now?

Alternative investments are becoming crucial in diversifying family office portfolios, offering unique benefits.

Discover how Supervest’s offerings can enhance your investment strategy. Explore our options today to diversify and strengthen your financial future.

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