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Tyler Wilkens By Opalesque Geneva: Financial advisors who believe that the market is late in the cycle and that valuations are high are faced with a conundrum.
They want to recommend diversifying to their clients, in particular diversifying into alternatives. But this presents two problems. Firstly, clients don't want to give up the returns they have been used to, especially those who invested in US stocks or the S&P, even if it will bring them capital gains, as they don't want to lose out in case the market continues to rise. Secondly, investing into alternatives does not necessarily mean less risk or downside protection. That's especially the case with private equity, as volatility is not observable in the short term and it is not immune to recession.
Tyler Wilkens, head portfolio strategist at Catalyst Capital Advisors, believe FAs can make their clients' portfolios more resilient and thereby avoid unfortunate deviations. He explains his solutions to Opalesque:
Opalesque: How does one make a portfolio resilient, that is, diversified and efficient?
Tyler Wilkens: In a 60/40 portfolio, 80 to 85% of the volatility comes from equities. That's our main risk. We are trying to diversify that risk with something that can go up when equities go down. I am not confident that's going to be private equity or private credit because those asset cla...................... To view our full article Click here
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