Portfolios for accredited investors need to shift towards private equity to be truly diversified, according to Michael Weisz, chief investment officer, president and co-founder of Yieldstreet, an alternative investing platform based in New York City.
Investing in public indexes or the S&P 500 are not actually diversified, Weisz argued in an interview.
“A few years ago, investments in private equities, which provide true diversification, were exclusively for the high-net-worth investor and institutions. Yieldstreet wanted to make these investments more accessible to more than people,” Weisz said.
Yieldstreet’s investments are designed for accredited investors and a minimum of about $10,000, with investments centering on such things as real estate, fine art and private equity. The firm has a history of just under a 10% return since its founding seven years ago, Weisz said.
“Financial advisors need to be talking to their clients about moving from public to private investments,” he said. “Do they want to continue to experience the ups and downs of public investments, or do they want to take advantage of the success of private equity? Private equity offers less volatility and a more healthy diversity. Private equity also offers an optimal alternative because the traditional 60% public equities and 40% bonds does not work anymore.”
Yieldstreet invests in 10 to 15 private markets. Fractional investments are offered to make minimum investments lower, he said. There are 14 million accredited investors in the U.S. who would be eligible to invest, he said.
Institutional investors have led the way to private and alternative investments, with half of institutional money now being invested in private equity, he said. “Unfortunately, advisors and their accredited clients are not there yet,” Weisz said.
Educating the advisors and investors is the key to more diverse investing.
“Information on private market investments needs to be easier to understand and access,” Weisz added. “Some clients do not know where to reach out for information. The job of the advisor is to offer the best suite of options. The average investor is nervous right now. They may know what is best for them but they are frozen into inaction. That is where the advisor needs to provide education.”
“We’ve seen a series of things happen in the last few years that we never could have foreseen. Who is to say when the next thing will happen” that will upset public markets? he asked.