Hightower Bethesda follows the Endowment Model Approach, a method of investing coined by large institutional investors use of alternative investments in their portfolios. These alternatives generally include Hedge Funds, Private Equity and Private Real Estate. Traditionally these types of investments have very high minimums and long holding periods, which had precluded an individual from being able to have access to these types of investments. However, for institutional investors, endowments, pensions etc., alternative investments have been widely adopted for regular use for 30 plus years.
At HTB we feel the challenges are more than offset by the improvement in the individual client’s overall investment experience, both in terms of overall return and experience felt by the investor to generate that return.
Our goal at HTB for our client’s portfolios is to protect their capital and grow their investments through steady rates of return. We do this by allocating a meaningful amount of our client’s portfolios to alternative investments. Most of our alternative investments have low correlation to traditional investments – equities and bonds. This means our clients don’t have to solely depend on markets going up to make money in equities and interest rates going down to make money in bonds.
This approach, much like a 3-legged stool, can help provide improved stability in an individual’s investments – equities, bonds and alternatives.
The alternatives we use include:
Hedge funds have the ability to provide exposure to non-traditional return drivers and play an important role in achieving a well-diversified portfolio. Hedge funds generally are unconstrained and flexible in nature often permitting robust trading strategies that are intended to enhance returns by exploiting market inefficiencies. The goal for many hedge funds is to earn positive risk-adjusted performance in all market conditions, as such generally hedge funds are evaluated using an absolute return standard, such as a risk-free return level plus a spread, independent of how the market or benchmarks are performing.
During the past 20 years the number of public companies in the U.S. has dropped. The shift is towards more companies staying private. Possible reasons for opting to a private company include; avoidance of the heavily regulated public markets, which can also lead to an increased long-term focus versus being marked to market each quarter, better terms raising equity and debt in private markets and the ability to maintain more control.
This asset class is for investors seeking alternative sources of income and growth versus the equity and bond markets. Generally defined as tangible property consisting of land, buildings and other improvements to these holdings. We at HTB have found current income from stabilized core properties to be a great supplement in our clients’ portfolios for income.