Affluent Investors are Increasingly Turning to Alternative Investments and Private Markets

Private Credit, Real Estate, and Infrastructure: Building Resilient Portfolios Through Alternative Investments

As traditional markets face increasing uncertainty, affluent investors are seeking resilient, income-generating opportunities. Three key segments—private credit, real estate, and infrastructure—stand out as vital components of modern investment portfolios. These asset classes offer attractive yields, inflation protection, and diversification benefits, making them a valuable investment option.

1. Private Credit: Yield in a Dislocated Lending Landscape 

Private credit, also known as non-bank lending, has become a significant source of capital for middle-market companies as traditional banks reduce their lending due to regulatory constraints. It offers:

• Attractive Yields: Potential returns of 8% to 12%.
• Floating Rate Protection: Many private loans are linked to floating interest rates, providing a hedge against rising rates.
• Capital Preservation: Structures that help protect against downside risks.

2. Private Real Estate: Income and Appreciation

Private real estate remains a cornerstone of alternative investing, offering current income and long-term capital appreciation. Key benefits include:

• Stable Cash Flow: Predictable rental income, often surpassing public bond yields.
• Inflation Protection: Leases can be indexed to inflation.
• Sector Diversification: Performance across varying economic cycles.

3. Infrastructure: Stability and Essential Asset Exposure

Infrastructure investments span transportation, utilities, digital infrastructure, and renewable energy, offering exposure to essential services with:

• Reliable Income: Steady, contracted cash flows over decades.
• Low Market Correlation: Performance independent of traditional equities and bonds.
• Inflation-Linked Revenues: Many contracts include inflation adjustments.

Building a Diversified Portfolio

Combining these three asset classes provides a diversified, income-generating portfolio with lower correlation to public markets:

Asset Class       Primary Benefit                  Risk Profile             Typical Yield Range 

Private Credit    Income Generation               Moderate                 8%–12%              

Real Estate        Income + Appreciation         Moderate to Low     5%–10%              

Infrastructure  Stability + Inflation Hedge     Low to Moderate      6%–9%               

Considerations and Risks

Investors should be aware of:

• Illiquidity: Lock-up periods can be lengthy, typically ranging from 3 to 10 years, although newer funds may have shorter periods.
• Due Diligence: Manager selection and asset underwriting are critical.
• Complex Structures: Legal, tax, and regulatory complexity require expert advisory services.

Affluent investors should work closely with experienced advisors or family offices to ensure these investments align with their overall financial goals and risk tolerance.

Conclusion

As traditional markets face increasing uncertainty and evolving interest rate dynamics, affluent investors are seeking out resilient, income-generating opportunities. Three private market segments—private credit, real estate, and infrastructure—have emerged as compelling components of modern investment portfolios. These asset classes offer attractive yields, inflation protection, and diversification benefits that can help preserve and grow wealth in various market environments. 

Interested in learning more? Please contact Gerry at Linden Wealth Management LLC. 

It is important to remember that all investing involves risk. This content is developed from sources believed to provide accurate information and provided by Twenty Over Ten and Linden Wealth Management LLC. It may not be used to avoid any federal tax penalties. Please consult legal or tax professionals for specific information regarding your situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.