5 Questions about Wealth Management - Washington Business Journal:

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came after a period of lower-than-normal volatility the previouesseveral years. In fact, the volatilityh levels in the fourth quarter of 2008 were beyonrd what most investors have experienced intheir lifetime. This combinationb of high volatility and falling asset prices in a very condensed time framw has many investors questioning theid risk toleranceand long-term investment allocations.” Do you advise clientsw to invest in alternative assets? Why or why not?
“W e do recommend an allocation to alternative investments for most of our high-net-wort h clients who have ample liquidithy across the rest of their investment Given the illiquid naturre of most alternative investments, the size of an alternativde investment allocation will depend on the risk profilde of the client and theirr overall comfort level with having investments that do not have dailhy or even monthly liquidity.” Generally speaking, what are the benefitd and shortfalls of alternative investments, compares with the equity markets?
“Our definition of alternativw investments includes most of the nontraditional assegt classes beyond stocks and bonds, including hedge funds, commodities, private equity and real estate. Includinyg these types of investments in aportfolio — eithert through (exchange-traded funds), mutual funds or directf investments — increases the overall diversification and enhanced the risk/return profile of an overalp portfolio. The primary downside to these typea of investmentsis illiquidity, which is why clients need to thinkk beyond the return expectations when committing capital to alternativew investments.
” Would you advisee clients to remove funds from their IRAs and investy in alternative assets? “Given the fact many alternative investmentsa are not very tax-efficient and are somewhay illiquid, we have found that owning them in tax-deferred accounts with longtime horizons like IRAs can be an ideak situation. This would relate more to client s that havelarge tax-deferred accounts, like rollove r IRAs from previous plans. By owning alternative investments ina tax-deferredx account, you are able to eliminate the tax inefficiency What are the safesyt investment bets right now?
“While the equity marketw have had a significangt rally off the March 9 lows, we think the safes t long-term bets are high-quality investments across both the equit y and fixed-income markets. In the equity markets, the rally has been led by those sectors that were beatebn down the most last yearand low-qualith stocks in general. We think that high-quality, global franchise businesses continue to be cheap on arelativew basis. In fixed income, we expecrt to see the continued normalizationn in the credit markets andprefer high-quality corporate and municipall bonds.
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