ASSET CLASSES

ALTERNATIVE ASSETS push back the efficient frontier, creating opportunities for higher risk-adjusted returns.  

This typically comes at a cost that includes higher complexity, more due diligence and lower liquidity.   

 Private Equity:  

We are expert in due-diligence and valuation of private equities.  We can help with LBOs, IPOs, exits and turn-arounds.  

Exposure opportunities include direct co-investments, primaries, secondaries, open-end direct, and direct. 

Credit: 

We recommend spending more of your Alternative risk-budget on Equities rather than on Credit.  

Credit exposure opportunities include direct lending, opportunistic, special situations, distressed, levered and structured.

 Hedge Funds: 

In our opinion, less than 1% of hedge funds are worth the management and incentive fees.  

Jim Simon's Renaissance is best-in-class.  Unfortunately, it's mostly closed to outside investors.  The late Mark Byrne (our founder's old boss) ran West -End Capital which was the best performing asset in Warren Buffett's portfolio in 2003, if memory serves.

Hedge fund strategies include long/short equity, event driven, relative value, global macro, risk premia, etc. 

 Real Estate: 

We like this Alternative asset class and can bring considerable local Dallas / DFW knowledge into due-diligence, valuation and acquisition.  

Post COVID innovation in the office space sector is of particular interest. 

Exposure opportunities include:

 real estate debt, real estate equity, real estate securities and more. 

 Commodities:  

We use commodities, combined with other assets like TIPS to hedge inflation risk.  Think of a 4-8% portfolio allocation as an inoculation against inflation and nothing more.  

Commodity ETFs, ETNs are appropriate for clients who don't need physical delivery.  Large funds might get better commodity exposure economics by rolling futures. 

We are expert at hedging commodity risk and are ready to help. 

 Property Cat Sidecars:

We believe re-insurance sidecar vehicles are under appreciated.  They are priced using actuarial methods, so valuation is relatively straightforward. Sidecars may be appropriate for HWNIs, UHWNIs and Institutional Investors.  
Sidecars allow investors to embrace Property CAT risk for one season.  Sidecars can be tailored to the investor group's risk appetite.  Leverage can be added in order to enhance potential returns.  

 Fixed income securities play an important role in most diversified portfolios by:

1. enhancing risk-adjusted returns,
2. boosting your efficient frontier, and by
3. providing ballast during market turbulence.

  For the vast majority of our clients, we recommend spending the lion's share of your risk-budget on Equities and Alternative Investments.  

 
We recommend that clients obtain Fixed Income exposure directly, by investing in safe, short-duration bonds that the investor is prepared to hold-to-maturity.

We're convinced that most investors are served best by spending their risk on Alts and Equities. This is not to say that there are no bargains in higher yields, it's just that they are very hard to find.  

In many instances managers can switch collateral out-from-under by substituting "like" or "similar" collateral.  

Equity tranches on structured credit like CDOs can exceed 10X leverage and tie up capital for more than a decade. 

 Beware of "actively managed", "alpha", "seeks attractive returns across all markets", "unconstrained Strategic Income Opportunities (SIO)", imbedded options, make-whole provisions, etc.   . 

Fixed Income Strategies include:

• Core
• Unconstrained (SIO)
• Short Duration
• Investment Grade Credit
• Securitized Assets
• US Mortgage-Backed Securities (MBS)
• Emerging Markets
• Municipals
• Inflation-Linked Bonds (ILB)

We don't advocate Fixed Income ETFs.  Fixed Income index funds do NOT behave like bonds, since there is no way to replicate the essential buy and hold-to-maturity feature of bond investing.