Alternative Investments

Achieving True Diversification with Momentum Wealth Management

Alternative Investments Designed and Managed by Momentum Wealth Management

At Momentum Wealth Management, we understand that traditional investment portfolios, primarily composed of stocks and bonds, may not always provide the diversification and risk mitigation that sophisticated investors seek. This is why we offer a suite of alternative investments, carefully designed and managed to offer less correlation to conventional market movements and provide exposure to more idiosyncratic investment strategies.

A few examples of alternative investments Include:

Hedge Funds

Private Credit

Direct Private Equity

Real Estate

Qualified Opportunity Zones

Private Equity Secondaries

The Thesis for Inclusion of Alternative Investments

Incorporating alternative investments into a client portfolio provides exposure to unique strategies and asset classes, such as hedge funds, real assets, commodities, arbitrage, futures, private equity, and private credit. These alternatives often operate independently of traditional market forces, offering the potential for enhanced returns and reduced risk through diversification.

Context and Evolution of Modern Portfolio Theory

Dr. Harry Markowitz, the founder of Modern Portfolio Theory (MPT), revolutionized the investment world by introducing the concept of portfolio diversification to achieve the "efficient frontier," a set of optimal portfolios offering the highest expected return for a given level of risk. MPT’s core principle is the idea that a diversified portfolio can provide better risk-adjusted returns.However, as markets have evolved, the correlation between traditional asset classes, such as stocks and bonds, has increased, moving much closer to 1, or being closely correlated to broader market movements. This shift diminishes the diversification benefits that MPT originally envisioned.

Enhancing Diversification with Alternative Investments

Through the use of alternative investments, we can more effectively structure a diversified portfolio with low or negatively correlated assets to broader markets. This strategy aims to achieve more substantive diversification, potentially providing better risk-adjusted returns and enhancing portfolio resilience during market downturns.

The Efficient Frontier and the Upper Left Quadrant

The efficient frontier represents the set of portfolios that offer the highest expected return for a given level of risk, according to MPT. Portfolios on the efficient frontier lie within the "upper left quadrant," where investors aim to achieve maximum returns with minimal risk.Alternative investments strive to position portfolios within this quadrant by offering returns that are less correlated with traditional assets, thus reducing overall portfolio volatility and enhancing the potential for higher risk-adjusted returns.

A Modern Perspective on Diversification

At Momentum Wealth Management, we believe in the power of alternative investments to unlock new opportunities and achieve true diversification. Our suite of alternative investment strategies is designed to provide exposure to unique asset classes and strategies, helping clients navigate complex financial landscapes and reach their investment goals.By leveraging alternative investments, we can build portfolios that are better positioned to withstand market volatility, providing a more robust and resilient investment strategy for our clients.Let us help you explore the potential of alternative investments and craft a portfolio that aligns with your financial objectives and risk tolerance.

Any reference to Tax or Legal:

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

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‍Insurance:

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

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