Alternative Investments Podcast (Clip 8 of 8) – B-REIT & Sufficiently De-Risking Alt Portfolios

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Alternative Investments Podcast – With Strategic Capital & Waterloo Capital

Don Simoneaux talks about B-REIT, and de-risking alternative investments at the portfolio level. Learn how to work with Strategic Capital – Registered Investment Advisors in Austin, Texas.

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 Episode 4 Podcast/audio/video Clip (8 of 8)

Working with Strategic Capital on Alternative Investment Strategies

Meet Don Simoneaux – Alternative Investments Waterloo Capital

Don Simoneaux and Bobby Russell discuss the future of alternative investments at the portfolio level, and how Waterloo and Strategic Capital work to try to de-risk alt investments for clientele


Moderator: I’m glad you brought up B-REIT a popular institutional investment option for those that are into real estate investment trusts or have as you as you said defined a theory or Playbook that they want to go down… talking about access to individual components and and skewing towards the idea of using a platform like Waterloo, through a strategic advisor like Strategic Capital in Austin can you talk a little bit about sufficiently de-risking pools of investments or maybe can you just opine on the idea of whether there will ever be a day or a period in the market in Alternative Investments where you ETFs or other tools are used to sufficiently de-risk whole portfolios for mainstream clients do you can you can you go down that that channel for a little bit and talk? 

Don Simoneaux (Director of Alternative Investments, Waterloo Capital): Sure, yeah so you know if you look at the way that institutions allocate and you can look at this the evolution over time kind of starting in the 60s and 70s when institutions were primarily stock and bond investors throughout the late 70s and early 80s a lot of those institutions started adding real estate as a broad allocation component to what they did, you know, going into the later 80s early 90s hedge funds and private Equity became a core part of what they did and you look at today; the most sophisticated investors out there which we feel are the institutional allocators; have a lot of times 40 to 50 percent of their portfolio invested in…

Moderator: Can I ask you a question along those lines real quick? Sorry to cut you off but you say the “most sophisticated investors”. Is this because the tooling, and resources, and back office support that they have while vetting Investments? Or, when you allude to that concept of sophistication from the institutional side – What specifically draws you to say something that way? I mean, clearly, there are a lot of resources there to a major Institutional Investor but can you give some nuance to that? 

Don Simoneaux (Director of Alternative Investments, Waterloo Capital):  Yeah, sure, so resources are huge components of that, but you know, when you are a 100 billion dollar Institution, the types of resources that you’re able to bring to the forefront for your allocators are going to be unparalleled, right? They have access to the best data they have access to a lot of times, the best professionals, with you know, fantastic academic backgrounds to be able to go in, and really look at their portfolio from an academic perspective to understand how correlations, and estimated returns, and volatility come together to create a portfolio that is really designed to meet the long-term objectives of that organization. If you think about a pension your investment time horizon you know, is perpetual, right? You’re investing for 100 plus years, and that really allows institutional allocators to think outside the box without having liquidity as a constraint to what they can do in their portfolios.

Don Simoneaux (continued): Individual investors – you know, they are constrained by liquidity; ideally the average families are… they’re saving for retirement that’s, you know 30, 20, 10 years away and you have to solve for liquidity to make sure the cash will be available to meet the needs of the client and so as we look at how institutional allocators allocate, they do have a heavier allocation to Alternatives, and the retail investing community has come a long way in regards to Alternative allocations. I think REITs and private real estate are now a component of more and more investors there’s a comfort there people understand conceptually what they’re owning and how they’re earning income off of those types of Investments, and while there’s some correlation with public markets with you know public and private real estate it does provide a nice diversification component to portfolios; does provide nice inflation protection and so it can serve a very important part of portfolios and other types of alternative strategies can play different different roles and portfolio construction. We really try to define our alternatives to our clients in the one or two categories either return enhancing investments; thinking about it: investments that ideally will have a higher anticipated rate of return compared to Public Market Investments and secondly risk reducing investments these are either going to be lower volatility strategies they’re going to either be more stable income strategies or just strategies that have less correlation with public market Investments. And it’s our job as an allocator to go through and determine what’s an appropriate allocation to create a portfolio framework that’s really designed to help our clients achieve their long-term goals; ideally with less risk in a portfolio that has ample liquidity to be able to meet their their needs – that’s really all we’re trying to solve for.