Invest with the Sophistication of an Institution

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We strongly believe in the benefits of investing a portion of portfolios in complementary, less-correlated assets asset classes. This idea may be quite new to individuals and families who have primarily invested in traditional stocks and bonds. However, sophisticated endowments, foundations, state pension plans and corporations have been investing in complementary assets for years. For over a decade, Cliffwater has specialized in providing the level of due diligence and rigorous, unbiased research that sophisticated institutional investors generally expect when investing in these complementary assets.

We use the investment approach of large institutions as a guide for how private clients should invest. The strategy utilized by these institutions can be summarized as follows:

  • Take advantage of the long time horizon that Endowments (and wealthy individuals) have—since the bulk of the assets will be passed to the next generation.
  • Monitor, but do not necessarily react, to short-term events and trends in the market.
  • Seek the higher returns available from equities, which are more volatile in the short run but outperform over time.
  • Invest a portion of the portfolio in complementary investments. While these investments are sometimes less liquid, long term investors benefit from their positive returns over time and the important portfolio diversification they provide.
How Have They Done?

Over the past 20 years, through June 2014, the 20 largest endowments in the US outperformed a global 60/40 mix by 4.2% annually. (For a $1 million investment, this represented over $4.6 million in additional gains over a global 60/40 mix during that time period.) They didn’t outperform every year, or even every five-year period, and future returns will certainly be different, but for investors with a portion of their wealth focused on providing for the next generation, this history is instructive. More importantly, these endowments experienced an increase in their Sharpe Ratio—a technical way of saying their portfolios were more efficient and took less risk to achieve those extra returns.

How is it relevant to you?

Surprisingly, the investment objectives of endowments mirror those of wealthy individuals. So a strategy that has worked for endowments holds important lessons for individual investors as well.

Like many of us:

  • Endowments can’t afford to lose significant principal.
  • Endowments require steady and growing withdrawals to meet expenses.
  • Endowments seek to preserve their principal to pass on to the next generation.
Our expertise is tailoring this approach for individual investors.

At New Market Wealth Management we:

  • Access institutional quality research on managers and funds through our strategic partnership with Cliffwater LLC. Cliffwater, our equity partner with approximately $65 billion in assets under advisement, has a research team of over 30 investment professionals that cover over 30 different asset classes and offer over three decades of asset allocation experience.
  • Make sure you understand today’s more complex investment options and benefit from our depth of knowledge in this area.
  • Apply the latest thinking of our Investment Policy Group. This team seeks to evaluate and interpret the plethora of investment data available today. New Market Wealth will then optimize all your holdings so that your mix of traditional and complementary investments is tailored to meet your objectives with a goal of achieving the lowest long term volatility possible.
  • Interpret the tax issues of the different securities and make sure the location of each investment is appropriate (in your personal taxable assets, retirement accounts or trusts.)
  • Ensure that the complementary investments are appropriate for your time horizon and risk tolerance. Some of these investments are less liquid, so determining the time horizon of that portion of your wealth is critical.
  • Provide access to elite managers with proven track records, stability, a replicable process and as much transparency as possible.