Alternative investments refer to assets that fall outside the conventional categories of stocks, bonds and cash. They encompass a wide range of strategies across real estate, private equity, hedge funds, managed futures, commodities, derivatives and more. As an LPL advisor, having exposure to alternative investments can help diversify client portfolios and enhance risk-adjusted returns. This article explores the top 5 alternative investments that LPL advisors should consider offering to clients in 2023.
Private equity remains a highly sought-after alternative investment in 2023
Private equity provides exposure to private companies not listed on public exchanges. With its ability to generate alpha and diversify beyond stocks and bonds, private equity is expected to see strong demand from investors in 2023. Top players like Blackstone, KKR and Carlyle are poised to capitalize on high dry powder levels and macro uncertainty through value creation in their portfolios.
Managed futures strategies shine as portfolio diversifiers
Systematic managed futures strategies built on algorithms had a standout year in 2022. By dynamically going long and short derivatives across equities, fixed income, currencies and commodities, they provide powerful diversification benefits. Leading providers like Cantor Fitzgerald, Park Hill and 361 Capital have brought institutional-caliber managed futures solutions to wealth management through low minimums and full transparency.
Non-traded REITs attractive for income and diversification
Non-traded REITs are an appealing way to add commercial real estate exposure without full stock market correlation. Major players like Blackstone and Starwood Capital offer NAV REITs with daily pricing, quarterly liquidity and 5-6% dividend yields backed by high-quality property portfolios. As rising rates pressure bonds, non-traded REITs stand out for income.
Commodities shine as an inflation hedge
Commodities like gold, oil and industrial metals were among the top-performing assets of 2022, with demand expected to persist in 2023. Leading commodity investing platforms from Schwab, Fidelity and iShares provide convenient access to this asset class for inflation protection and equity diversification.
Market-linked CDs protect against volatility
For conservative investors, market-linked CDs from leading banks provide principal protection while allowing some upside tied to market benchmarks. With their defined outcomes, market-linked CDs can enhance client portfolios in an uncertain environment going into 2023.
In an increasingly complex market, alternative investments allow LPL advisors to build durable portfolios and meet a wide range of client needs. As advisors assess their investment lineups for 2023, private equity, managed futures, non-traded REITs, commodities and market-linked CDs stand out as top alternatives warranting consideration.