Advisors not done with alternatives despite bull run

investmentnews.com:

Back in 2022, when both legs of the 60/40 portfolio were buckling, advisors were purchasing alternative assets for their clients as if there was no tomorrow. Real estate, crypto, private credit, you name it! Anything to escape the pummeling they were getting in good old stocks and bonds.

Tomorrow finally arrived in 2023, with the S&P 500 returning approximately 24 percent and the yield on the benchmark 10-year Treasury note rising well above 4 percent, providing comfort for speculators and savers alike.

This new investing environment – not to mention a seemingly Goldilocks economy – suddenly raises the question of whether advisors should start reducing their stakes in those illiquid alternatives that once provided them safe harbor. A Cerulli survey from last fall of more than 200 upmarket advisors showed 54 percent of those surveyed maintained an alternatives allocation of 5 percent or greater.

In other words, a lot of advisors are now facing some big – or small – allocation decisions.

“Even after a great 2023 for stocks and bonds, we still believe that owning alternative investments as part of a properly diversified portfolio makes sense,” said Paul Camhi, senior financial advisor at The Wealth Alliance. “We include these strategies as part of our strategic, long-term allocation, not as tactical short-term investments.”

Camhi said that he’s still actively allocating to both private real estate and private credit this year.  Both asset classes provide attractive income opportunities for his clients in his opinion.

Lawrence Calcano, CEO of alternative investment provider iCapital, said that demand for alternatives has remained strong even in the face of a raging bull market and steepening yield curve. In a study last