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BEYOND TRADITIONAL
UNLOCKING THE POTENTIAL OF ALTERNATIVE ASSETS
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ORDER CHAD LARSON’S NEW BOOK
UNLOCKING THE POTENTIAL OF ALTERNATIVE ASSETS
Designed to provide seamless access to institutional quality investment opportunities within global private markets, this Portfolio is custom built with the goal of providing stable income, positive long term real returns, and downside protection.
The Alterna Private Income Portfolio stands out asa compelling choice for inclusion in a well-diversified investment strategy. Here is why Alterna is a compelling addition to your portfolio:
Stable Income: Alterna aims to deliver consistent and reliable cash flow, enhancing your financial stability.
Long-Term Capital Appreciation: Designed for growth, the Alterna Private Income Portfolio offers the potential forcapital appreciation over time
Diversification Benefits: By complementing your public market securities, Alterna provides significant diversification, helping to reduce overall portfolio risk
The Alterna Private Income Portfolio is a strategic fit for investors who:
Seek Stable Cash Flows: Ideal for those seeking steady income to their investment portfolio.
Desire Inflation Protection: Suitable for investors aiming to hedge against inflation.
Prioritize Downside Protection: Appropriate for those who value an alternative to downside protection.
Value Diversification: Attractive for investors seeking to diversify their holdings beyond traditional public market securities (stocks and bonds).
Have a Long-Term Horizon: Ideal for those with an investment timeframe of at least 5 years.
Understand Alternative Investments: Suitable for investors who are comfortable with the inherent risks of alternative investments, including liquidity
Evergreen funds offer continuous investment, allowing immediate capital deployment into a diversified portfolio.They provide the benefit of continuous compounding return sand reduced reinvestment risk by minimizing periods when investors are out of the market. These funds simplify capital management and are easier for investors to maintain desired allocations to alternatives. They enhance portfolio stability through diversification and are more accessible and flexible for individual investors, making participation in alternative investments possible without the need for institutional scale.
Continuous Investment Vehicle: Ideal for those seeking steady income to their investment portfolio.
Immediate Capital Deployment: Investors can utilize capital immediately into a diversified alternative investment portfolio.
Continuous Compounding: Returns are continuously compounded as capital is reinvested automatically
Reduced Reinvestment Risk: Minimizes periods when investors are "out of the market"after realizing gains.
Simplified Capital Management: Easier for investors to manage and maintain desired allocations to alternatives.
Diversification: Provides immediate exposure to a diverse range of alternative investments, enhancing portfolio stability
Efficient for Individual Investors: More accessible and flexible, allowing individual investors to participate in alternatives without needing the scale of institutional investors.
Drawdown funds operate on a capital call structure, with investments made over several years through periodic capital calls. Capital is deployed in stages and returns to investors as investments are exited, requiring manual reinvestment, and often leading to idle periods. These funds typically have a fixed term, focusing on specific strategies, sectors, or geographies, resulting in concentrated portfolios. They are commonly preferred by institutional investors who can manage capital calls and reinvestments, with the potential for higher returns depending on investment timing and selection.
Capital Call Structure: Funds are invested over several years through periodic capital calls from investors.
Staged Deployment: Capital is deployed in stages, taking years to fully invest the committed capital.
Return of Capital: Returns capital to investors as investments are exited, typically through sales or IPOs.
Reinvestment Requirement: Investors need to reinvest capital distributions manually, often leading to idle periods.
Fixed Term: Typically have a defined investment period and lifespan, often around 10 years.
Targeted Investments: Focuses on specific strategies, sectors, or geographies, often resulting in concentrated portfolios.
Institutional Preference: Commonly used by institutional investors with the resources to manage capital calls and reinvestments.
Potential Higher Returns: Can achieve high returns through targeted investments, though this depends on the timing and selection of investments.
Welcome to MLD Wealth's comprehensive solution for alternative investing insights. Our commitment is to provide you with a thorough understanding of this dynamic asset class, from its fundamental principles to its strategic advantages and market implications.
Alternative Investments represent a cornerstone of sophisticated investment portfolios. With its potential for enhanced returns, diversification benefits, and unique opportunities for value creation, alternatives have garnered increasing attention from institutional and individual investors.
At MLD Wealth, we pride ourselves on our commitment to clarity, transparency, and client education. Our goal is to empower you with the knowledge and insights needed to make informed investment decisions and navigate the complexities of the alternative investment landscape with confidence.
Our current focus centers on two key areas: navigating alternatives in a changing environment and exploring the benefits of evergreen private fund structures. These topics are particularly relevant given the prevailing market condition sand evolving investment landscape.
Before delving into specific strategies and structures, it's essential to understand the fundamentals of Alternative investing. Alternative investments involve investing in predominately non-traded securities, typically with the goal of driving operational improvements, strategic initiatives, and ultimately, generating attractive returns for investors.
The allure of alternatives lies in their potential for superior risk-adjusted returns and portfolio diversification. Unlike public markets, where short-term volatility and market inefficiencies can pose challenges, alternatives offer investors the opportunity to take a more active role in shaping the performance of their investments over the long term.
In recent years, we've observed a notable shift in market dynamics, characterized by elevated correlations between stocks and bonds and lower expectations for future returns.Against this backdrop, alternatives have emerged as an increasingly attractive option for investors seeking enhanced portfolio returns and risk mitigation.
There are multiple pathways for accessing alternative investments, each with their own unique features and considerations. These include diversified funds-of-funds, traditional drawdown funds, direct investments, and evergreen funds. Understanding the nuances of each approach is critical to building a well-rounded and diversified alternatives portfolio.
Evergreen fund structures have gained prominence in recent years, offering investors a more flexible and efficient way to deploy capital and manage their alternative allocations. Unlike traditional drawdown funds, which follow a predetermined investment timeline, evergreen funds allow for continuous deployment of capital, immediate exposure to a diversified portfolio of alternative assets, and ongoing opportunities for liquidity management.
Evergreen funds offer an efficient means for investors to achieve their desired allocations quickly and manage capital efficiently.
Evergreen funds have the potential to outperform drawdown funds in an investor's portfolio, thanks to their immediate compounding of returns and ongoing capital deployment.
Blending drawdown and evergreen funds can potentially enhance portfolio diversification and mitigate risk, while maximizing long-term returns for investors.
Selecting best-in-class managers with a proven track record of performance and value creation is paramount to success in alternative investing.
Alternative investing represents a compelling opportunity for investors seeking to enhance portfolio returns, diversify risk, and capitalize on unique investment opportunities. By staying informed, understanding market dynamics, and leveraging innovative investment structures such as evergreen funds, investors can position themselves for success in today's evolving investment landscape.
Stay tuned for more in-depth insights, analysis, and practical guidance on alternative investing from MLD Wealth.
The Drawdown Private Equity Structure chart shows that the allocation to private equity and liquid assets changes each year, with an average liquid asset percentage of 58%.
Note: The above schedule is for illustrative purposes only. Diversification does not guarantee returns or capital preservation. Top chart assumes the evergreen vehicle is fully deployed and is representative of evergreen vehicles that exist in the market today
The chart illustrates the Evergreen Private Equity Structure over a long-term 10-year period, consistently maintaining a composition of 85% private equity and 15% liquid assets throughout the duration
Note: The above schedule is for illustrative purposes only. Diversification does not guarantee returns or capital preservation. Top chart assumes the evergreen vehicle is fully deployed and is representative of evergreen vehicles that exist in the market today.
This line chart shows the cumulative value of investing $100 million in Evergreen and Drawdown vehicles over a 10-year period, with distinct lines for each fund to illustrate their performance trajectories.
Note: For illustrative purposes only. Assumes 10-year term. Modeled drawdown private equity fund assumes that capital is deployed in equal increments over a 5-year investment period and that investments are held for 5 years before their sale and distribution of capital to the limited partners. Undrawn capital is assumed to be held in a 60/40 portfolio of public equities and bonds generating a 6.8% return assuming a 5% return for bonds and 8% return for equities, which is the long-run historical returns of the MSCI World Index and Bloomberg Global Agg Index since 1990. Distributions from the drawdown fund are re-invested into that 60/40 portfolio. For the evergreen vehicle, it is assumed that all liquid capital is held in liquid credit, cash and treasuries generating a 5% return and the vehicle is fully deployed at 85% private equity deals and 15% liquidity sleeve. Assumes a net IRR of 13.5% for the Drawdown fund and private equity portion of Evergreen Vehicle. The net 13.5% IRR is illustrative of the Cambridge Global Private Equity Index from 2000 to 2019(inclusive of all Global Buyout and Growth Equity funds).
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