The Rise of Alternative Investments: Diversifying HNW Portfolios

In an era of evolving markets and uncertain returns from traditional assets, high-net-worth (HNW) individuals are increasingly looking beyond conventional stocks and bonds to fortify their portfolios. The “60/40” portfolio (60% stocks, 40% bonds) that served so well for decades is being reimagined, giving way to a more diverse and sophisticated allocation that includes alternative investments.

These alternative investments span a wide range of asset classes, including private equity, infrastructure, real estate, hedge funds, commodities, and even collectibles. They offer not only unique and potentially enhanced return profiles, but also the benefit of reduced correlation with traditional public markets. For sophisticated investors, they represent a way to build portfolio resilience while accessing opportunities typically beyond the reach of the average investor.

Why High-Net-Worth Individuals Choose Alternative Investments

The move towards alternative investments by HNWIs is driven by several compelling factors:

• Potential for Higher Returns (Illiquidity Premium/Alpha)
  Many alternative investments are privately held and therefore less liquid, requiring investors to commit capital for extended periods. In return for this illiquidity, investors are often compensated with a return premium. Additionally, private assets are typically accessed through specialized or restricted networks, resulting in less competition at the point of acquisition. Together, illiquidity and exclusive access can drive the potential for higher long-term returns.
  

  
• Reduced Market Correlation
  Many alternatives have low or even negative correlation with public equities and fixed income, providing a valuable buffer during downturns in traditional markets.
• Inflation Hedging
  Certain alternatives, particularly real assets and those with floating rate components, can offer strong protection against inflationary pressures, preserving purchasing power.
• Access to Unique Growth Opportunities
  The vast majority of businesses and real assets in the U.S. are not publicly traded. As we’ve highlighted, out of an estimated 8.3 million businesses in the United States, only about 4,700 are traded on public stock exchanges. This means more than 99% of businesses in this country cannot be invested into by the average American. Alternative investments open the door to this expansive private market which, in turn, helps investors gain exposure to broader segments of the economy.

The Trajan Advantage: Your Guide to Sophisticated Alternative Investing

Navigating the complex and often dense world of alternative investments requires specialized expertise, deep due diligence, and privileged access. This is where Trajan Wealth’s unique approach truly differentiates itself.

When you work with many traditional brokerages, you’re often limited to their proprietary investment products (which can lead to higher costs), reduced diversification, and missing out on some of the best options in the market. As an independent, privately owned firm, Trajan Wealth doesn’t create and push our own proprietary investment products. Our only incentive is finding the optimal solutions for your specific situation using a diversified product list. This ensures our objectives are fully aligned with yours: the more you make, the more we make.

Our commitment to your best interests is fundamental. Trajan Wealth always acts as a financial fiduciary and will always place your best interests first. This is the highest standard of care in the financial services business; a standard not all advisors are held to. When you look at our advisors’ business cards, their title is “Fiduciary Advisor,” a clear distinction from many others who are simply “Financial Advisors.”

Furthermore, while most financial advisors outsource money management, Trajan Wealth is both your advisor and the actual money manager of your accounts. Our portfolios are managed in-house by our investment team, maximizing our ability to personalize your exact needs and make direct decisions on what to buy and sell, and when. This is a very unique practice, setting us apart from competitors who rely on cookie-cutter options or third-party managers. Our extensive network of relationships brings you these private market opportunities that most advisors don’t even offer. These private offerings have historically demonstrated the potential for outperformance with less risk compared to more well-known public market stocks.

Conclusion: Building a Resilient, Diversified Future with a Smart Game Plan

The strategic allocation to alternative investments is no longer an edge, but a core component of a prudent financial plan for high-net-worth individuals. By diversifying beyond traditional assets and gaining exposure to the vast opportunities in private markets, HNWIs can enhance returns, reduce volatility, and build a more resilient portfolio designed to withstand various economic conditions.

At Trajan Wealth and Trajan Estate, we understand that true wealth management requires a forward-thinking and comprehensive approach. Our dedicated team of fiduciary advisors and experienced estate attorneys (and even an in-house tax professional) work under one roof to create a custom-tailored Smart Game Plan that integrates cutting-edge alternative investment strategies into your overall financial architecture.

We are committed to our mission to educate to empower, providing clear insights and strategic guidance, so you can achieve peace of mind knowing your portfolio is optimized for long-term growth and protection. As a privately owned, Veteran-owned firm, our values are rooted in service and the Golden Rule: “go out of your way to solve other people’s problems.” We answer to you, our client.

Isn’t it time for a second opinion regarding your finances?