In a recent roundtable discussion, four advisory executives outlined how they are steering client portfolios toward non-traditional assets to capture growth and income while managing risk. The panel, convened by InvestmentNews, included leaders from RIAs and broker-dealers who collectively oversee more than $50 billion in client assets. They emphasized that the current environment—marked by elevated interest rates, geopolitical uncertainty, and stretched equity valuations—demands a broader toolkit than the classic 60/40 equity-bond split.
One key theme was the strategic use of emerging-market equities and debt. John Chen, chief investment officer at a $12 billion RIA based in San Francisco, noted that he has increased allocations to Indian and Brazilian equities, citing favorable demographics and reform momentum. “India’s GDP growth has averaged 6.5% over the past three years, and its equity market has compounded at roughly 12% annually,” Chen said. He also highlighted Brazilian real-denominated bonds yielding 8.5% as a source of income that is uncorrelated with U.S. Treasuries.
Private credit emerged as another favored vehicle. Sarah Patel, managing director at a $9 billion wealth management firm in New York, said her firm has allocated 15% of client portfolios to direct lending funds and private credit strategies. “These instruments offer yields in the 9% to 11% range, with floating-rate coupons that adjust as the Fed moves,” Patel explained. She cautioned, however, that liquidity constraints require careful client education, especially for those nearing retirement. The firm uses a tiered liquidity approach, with 70% of the private credit allocation in shorter-duration vehicles (one to three years).
Real assets, including infrastructure and natural resources, also drew attention. Michael Torres, a partner at a $7 billion multi-family office in Houston, pointed to investments in U.S. energy infrastructure and European renewable-energy projects. “We’ve placed $200 million into a fund that owns pipelines and storage facilities, generating a 7.5% cash yield with inflation-linked revenue streams,” Torres said. He added that such assets have shown low correlation to both equities and bonds during the 2022 selloff, providing portfolio resilience.
The panelists stressed the importance of managing volatility through alternative beta strategies. Lisa Nguyen, chief investment strategist at a $15 billion broker-dealer, described using a managed-futures program that has returned 8.2% over the past 12 months with a volatility of just 6%. “These trend-following strategies can profit in both rising and falling markets, acting as a hedge against equity drawdowns,” Nguyen said. Her firm allocates 5% to 10% of portfolios to such strategies, depending on client risk tolerance.
Liquidity management remains a central concern. Chen noted that his firm limits illiquid alternatives to 20% of a portfolio, with the rest in liquid ETFs and mutual funds that provide daily pricing. “We run stress tests showing that even in a 2008-style liquidity freeze, our clients can meet five years of spending needs without selling illiquid holdings,” he said. Patel added that her firm uses a “liquidity ladder” that matches asset maturities to client cash-flow needs, a practice she said has reduced redemption requests during market stress.
The conversation also touched on the evolving role of fixed income. With the Bloomberg U.S. Aggregate Bond Index yielding around 4.8%, Torres said he is favoring shorter-duration corporate bonds and floating-rate notes over long-duration Treasuries. “We’re seeing opportunities in investment-grade credit with yields of 5.5% to 6%, which offer a better risk-reward than 10-year Treasuries at 4.2%,” he said. This shift reflects a broader view that traditional bonds may not provide the same ballast they did in prior decades.
Finally, the advisors underscored the need for ongoing client communication. Nguyen said her firm holds quarterly webinars explaining alternative strategies and their role in portfolios. “Clients who understand the rationale are far less likely to panic during drawdowns,” she said. The panelists agreed that as markets evolve, advisors must continue to expand their toolkit beyond traditional stocks and bonds to deliver growth, income, and resilience.
