Achieve Your Investment Goals with Private Assets
A Traditional Investment Approach Is No Longer Enough
Recent market volatility and economic shift exposed the limitations of the traditional investment approach. With stocks and bonds often moving in the same direction, investors can no longer rely on bonds to provide the same stability during market downturns. The traditional 60/40 investment portfolio (60% stocks/40% bonds) is ill-equipped to navigate the complexities of today’s markets.
Private Markets Investments Provide a Solution
Private markets investments can be a powerful tool to enhance diversification, generate stronger returns, and reduce portfolio volatility.
For decades, institutional investors have been reaching beyond traditional asset classes such as bonds and equities and have experienced the benefit of private markets investments in their portfolios. We wanted our clients to have the same advantage.
That’s why we introduced private markets solutions in 2018 for our clients, based on our strong conviction that including private assets enhances the potential for portfolio success.
What are Private Markets Investments
Private market investments are broadly defined as debt and equity investments that are not listed on a public exchange or traded through the bond or commodities market. Private investments are made directly into private companies and are customized to meet the unique capital requirements of each business or project. The main asset classes within private markets include:
- Private Debt
- Private Equity
- Private Real Estate
- Private Infrastructure
Benefits of Private Markets Investments:
Investing in private markets gives your portfolio a lot of potential:
- Diversification: Private markets broaden the range of investments available to investors, since they represent nearly 90% of investments globally. Now that’s a diversification opportunity!
- Attractive returns: Private markets investors are compensated for holding assets that are not immediately tradable. This “illiquidity premium” provides a unique advantage that can result in higher long-term returns compared to public markets. Additionally, active management in private markets, such as hands-on operational improvements in private equity or underwriting in private credit, may offer additional opportunity to increase returns.
- Lower volatility: Private markets are not subject to day-to-day price fluctuations of public markets, which can mean lower overall portfolio volatility and potentially more stable performance in volatile markets. Moreover, the highly customized nature of private market investments often results in more beneficial investment terms to protect capital, leading to greater downside protection. Finally, they have low correlation to traditional asset classes such as public equities and bonds, adding potential portfolio stability in fluctuating markets.
- Stronger risk-adjusted returns: An allocation to private markets can balance the potential for higher returns while also managing risk mitigation. This can improve portfolio resilience during challenging market conditions.
Source: Blackstone University Essentials: Private Estate. https://www.blackstone.com/pws/essentials-of-private-real-estate/
A Note on Risks
Investing in private markets also involves potential risks, including limited liquidity, longer investment horizons, and less regulatory oversight compared to public markets. It’s essential to confirm that any private market investments are aligned with the risk profile, investment objectives, liquidity needs, and time horizon outlined in your Know Your Client (KYC) questionnaire to ensure they are suitable for your individual financial situation.
Additionally, access to private markets is typically limited to accredited investors, who generally must meet certain income or net worth thresholds to qualify for participation.
Watermark Private Portfolios
Watermark Private Portfolios (Watermark) are fully-diversified, multi-strategy total portfolio solutions, managed by Harbourfront Wealth’s team of experienced portfolio managers. They are designed for a broad array of risk tolerances and investor needs, including income and liquidity. These portfolios are built with institutional-calibre investments, incorporating private assets as well as traditional public equities and bonds. Each portfolio is designed to maximize returns for a specific level of risk.
With Watermark, clients benefit from:
- Diversification across multiple asset classes, investment managers and strategies in one account
- Private market exposure, including equity, debt, real estate and infrastructure
- Comprehensive reporting and performance attribution
- Tactical asset allocation to adapt to market shifts
- Tax-efficient design, including deductible fees in non-registered accounts
A Prudent Approach
The time has come for retail investors to apply the model of a pension portfolio to help provide a better overall investment experience of better returns with less risk.