If the 60/40 portfolio is dead, alternatives, including digital assets, are the answer, according to Eric Satz, founder and CEO of Alto, an alternative investment platform.
Alternatives are a must for modern portfolio diversification, Satz said in an interview.
A simultaneous decrease in bonds and stocks occurred in 2022, causing panic and uncertainty for traditional investors, Satz said. “The lack of diversification with the 60/40 mix leaves little room for error, and a greater chance of risk. Sticking to a 60/40 asset mix is an outdated approach for today’s investors,” he said.
This is particularly pertinent advice for retirees, who have access to a $39 trillion pool of retirement funds, noted Satz, who has a background in investment banking and has started several successful companies before launching Alto in 2018.
“We wanted to make alternative investments, including digital assets, available to everyone, not just ultra-high-net-worth investors,” he said. The firm focuses on investors with retirement assets because those are long term investments, he said.
“I started thinking about this several years ago when I tried to switch some retirement funds to an alternative account and was told my broker-dealer could not do it. I tried doing it myself and it was a miserable experience,” Satz said. “We wanted to take that experience and make it simpler and open to all investors.”
Alto investors only need a minimum investment of a few hundred dollars and an account can be opened in a few minutes, Satz said. “Investors can create a new account online and can take retirement funds to start it.”
Alto is a custodian and does not select particular asset classes or investments.
“Having access to alternatives is a good way for an advisor to differentiate himself or herself from the competition. Advisors need to get smart about alternatives in general and then learn about specific investments in real estate or private equity or other assets,” Satz said. Alto new has 30,000 clients and $1.1 billion in assets under administration, he said.
“Alternatives represent an opportunity for outsized returns and diversification reduces portfolio volatility and risk, especially for those investors preparing for retirement and for advisors trying to assist them,” he said.
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