The way we think
about alternatives.

Most people are familiar with stocks, bonds, and cash in the investment world. However, there are some assets that don’t fit nicely in one of those three conventional categories. Think: venture capital, real estate, or hedge funds, for example. 

Non-traditional investments are increasingly sold to individual investors as an “alternative” to traditional investments in stocks and bonds.  The restrictions of these investments to accredited investors adds a layer of exclusivity, sophistication and mystique to the funds. 

The reality of alternative investments, however, is much more mundane.  “Alternatives” is an enormous class of investments – some extraordinary, some horrific, some conservative, and some risky.  Advisors tend to be split on the validity of alternatives for individual investors.  Some advisors tend to believe that alternative strategies are a panacea for diversification, risk management, and enhancement of returns, while other advisors believe that they are expensive and ineffective.

At H&R, our opinion of alternatives is less black and white.  We do believe that alternatives can be a prudent addition for certain clients.  Such clients are generally ultra-high net worth individuals or endowments for whom liquidity is not a concern.  However, for the overwhelming majority of our clients, including our high-net-worth clients, we don’t generally recommend alternatives.

In our approach to alternative investments, we carefully assess how an investment might fit with the client’s other holdings and long-term objectives, make sure the client is being compensated for the illiquidity of the investments, and monitor the unique risks associated with these non-traditional investments.  Our primary field of expertise in this space is working with clients to build portfolios of direct investments in private equities.