5 Questions about Wealth Management - Washington Business Journal:

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came after a period of lower-than-normal volatilitty the previous several In fact, the volatilituy levels in the fourth quarter of 2008 were beyondr what most investors have experienced in their This combination of high volatility and fallinfg asset prices in a very condensed time frame has many investorss questioning their risk tolerance and long-term investmentg allocations.” Do you advise clients to invest in alternativer assets? Why or why not? “We do recommencd an allocation to alternative investments for most of our high-net-worthu clients who have ample liquidity across the rest of their investment portfolios.
Given the illiquid nature of mostalternativee investments, the size of an alternativew investment allocation will depend on the risk profile of the client and their overallp comfort level with having investments that do not have dailuy or even monthly liquidity.” Generally what are the benefits and shortfalls of alternativd investments, compared with the equity markets? “Our definition of alternative investmentds includes most of the nontraditional asset classes beyond stockes and bonds, including hedge commodities, private equity and real estate.
Includingb these types of investmentsd in a portfolio eitherthrough (exchange-traded funds), mutual funds or direct investments increases the overall diversification and enhancexs the risk/return profile of an overalll portfolio. The primary downside to these types of investments is which is why clients need to thin beyond the return expectations when committing capital toalternative investments.” Wouldd you advise clients to remov funds from their IRAs and invesr in alternative assets?
“Given the fact many alternative investments are not very tax-efficient and are somewhat we have found that owniny them in tax-deferred accounts with longtime horizons like IRAs can be an ideaol situation. This would relate more to clientsa that havelarge tax-deferred accounts, like rollovedr IRAs from previous 401(k) plans. By owninvg alternative investments ina tax-deferred you are able to eliminatee the tax inefficiency issue.” What are the safest investment bets righ now? “While the equity markets have had a significant rallt off the March 9 lows, we thino the safest long-term bets are high-qualituy investments across both the equity and fixed-incomed markets.
In the equity markets, the rally has been led by those sectors that were beaten down the most last yearand low-quality stocks in general. We think that large-cap, global franchise businesses continue to be cheal on arelative basis. In fixed we expect to see the continued normalizationh in the credit markets andpreferd high-quality corporate and municipal bonds.”