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How Private Asset Investments Can Safeguard Your Retirement

How Private Asset Investments Can Safeguard Your Retirement

By: Nik Korba

Most investment professionals will tell consumers market volatility is a simple fact of life and that market ups and downs should be expected. In fact, leveraging market volatility can be part of a healthy investment strategy.

For the average consumer, however, fears caused by volatility often stand as a barrier to investing. A recent survey found that 64 percent of consumers would rather stick to cash than risk the market swings caused by volatility, while another found that 54 percent of millennial investors said market volatility keeps them up at night.

“Volatility certainly exists when markets are viewed in the short term, but over long-term periods the markets are fine,” says Matt Willer, Managing Director of Capital Markets and Partner at Phoenix Capital Group Holdings, LLC. “When I hear people voice their fears about volatility in the stock market, I immediately ask them about their time horizon and goals as an investor. Identifying time horizons and risk tolerance can help investors to identify a market investment strategy suitable to their goals.”

Willer has over 20 years of experience in corporate finance, serving in positions at the executive management and board of director level for public and private companies in the US and Canada. He has deep expertise in scaling and financing growth-stage companies in multiple industry verticals and has raised over $1.1 billion in capital through debt and equity transactions, both brokered and non-brokered, with issuers. 

At Phoenix Capital, Willer is responsible for investor relations and structuring, managing, and acquiring private capital across multiple capital sources and classes. He believes investors looking to break free from market volatility and safeguard their retirement should consider private asset investments — a type of investment vehicle that can bring healthy diversification to an investment portfolio.

“Private asset investing can act as a safeguard against volatility primarily because many private assets are not correlated to the market,” Willer explains. “Hence, they avoid certain elements of volatility and eliminate extra variables. Additionally, many private asset investments are backed by real tangible assets creating a more clear and tangible backstop to downside.”

The basics of private asset investing

Private asset investing can include a number of assets, including private equity, private debt, real estate, and natural resources. Infrastructure investing, which involves assets like toll roads and airports, is another form of private asset investing that is generally made directly with a private company rather than through a public exchange.

Illiquidity is one of the key differences between private asset and stock market investing. With private asset investing, investors are often required to keep funds tied up in the asset for lengthy periods, sometimes as long as a decade.

“Typically, private asset investments don’t have the same liquidity profile as listed securities, if any at all, so investors should understand the liquidity profile and measure that against their needs,” Willer explains.

Valuation is another factor that differs from private asset investments. Unlike the stock market where valuations happen in real-time, private asset valuations happen periodically, such as every quarter. The valuations with private assets are based on operational performance, rather than short-term market sentiments.

Exploring the benefits of private asset investing

While every investment involves a level of risk, private assets are often seen by the average investor as being prohibitively risky, a perspective that some experts believe to be unfounded.

“Private asset investing is inappropriately viewed as universally high risk,” Willer says. “The view flows from the fact that today’s financial markets are dominated by household name firms with considerable marketing budgets that have indirectly trained everyday Americans to think investing really means the markets or annuities or CDs. With a wider understanding of financial markets, people come to see there is a very lucrative universe of alternative investments, such as private assets, that are oftentimes better suited to meet investors’ goals.”

Willer believes now is a good time for investors to look into the ways private assets can safeguard their retirement goals.

“There are several reasons this could be a compelling time to balance a portfolio with private asset investing,” he says. “First, we are at the peak in an interest rate cycle, so there are opportunities to lock in favorable longer-term yields right now that may deteriorate over the next 12 to 24 months. Secondly, we have many forces that could lead to continued market volatility, including international chaos, wars, an election year, interest rate uncertainty, and inflation. Those are all elements with the potential to create volatility that could be avoided or minimized in private assets.”

Willer also advises investors to start slowly: “Don’t stretch your comfort zone. Isolate an amount you are comfortable starting with and stick to that. Start your diversification by participating in a few of the highest quality offerings.”

Published by: Martin De Juan

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