Alternative Sources of Income
Finding Yield with Alternative Investments
Leveraging Alternatives for Income Potential
Introducing private market alternatives into a traditional portfolio may help investors face today’s yield challenges. In particular, areas such as private real estate and private credit may be worth a close look by income-oriented investors.
Comparison of Yield
Annual Yield from a Traditional 60/40 Portfolio1
Annual Yield from a Portfolio with Private Market Allocation2
- Traditional 60/40 portfolio is comprised of 60% Equities and 40% Fixed Income.
- The portfolio with private market allocation has the following asset class allocation: Private Credit (20%), Real Estate (20), Fixed Income (30%) and Equities (30%).
Source: Bloomberg, Morningstar, as of 9/30/2021. The yield on the traditional 60/40 portfolio was calculated using the S&P 500 Dividend Yield and the annualized Bloomberg U.S. Aggregate Bond Yield. The yield on the portfolio with a private market alternative allocation was calculated using the S&P 500 Dividend Yield, the annualized Bloomberg U.S. Aggregate Bond Yield, annualized Cliffwater Direct Lending Index quarterly income and the annualized NCREIF ODCE quarterly income. There can be no assurance that any Blackstone fund or investment will achieve its objectives or avoid substantial losses, or that alternative investments will generate higher yields than other investments. Annualized yields are as of September 30, 2021. Annualized returns and volatility are calculated based on the quarterly returns over the 15-year period from October 2006 to September 2021. The information herein is provided for educational purposes only and should not be construed as financial or investment advice, nor should any information on this webpage be relied on when making an investment decision. Opinions expressed reflect the current opinions of Blackstone as of the date hereof and are based on Blackstone’s opinions of the current market environment, which is subject to change. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of, future events or results.
Finding Income in a Low Rate World
A traditional portfolio no longer offers the yield it once did
Historical Yield of a 60/40 Stock/Bond Portfolio (%)
Source: Bloomberg, Morningstar, as of September 30, 2021. Hypothetical portfolio allocated 60% to the S&P 500 Index, 40% to the Bloomberg U.S. Aggregate Bond Index. The yield on the traditional 60/40 portfolio was calculated using the S&P 500 Index dividend yield and the annualized Bloomberg U.S. Aggregate Index yield. Portfolio yields are shown from September 2008 to September 2021. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of, future events or results.
Private credit and private real estate have historically offered higher yields than other asset classes
Yield Comparison (Average Annual Yield, Trailing 10 Years as of Q2’21)
Source: Morningstar, Cliffwater, NCREIF, Bloomberg, as of 9/30/2021. The yields of the asset classes presented are based on the following indices: For Private Credit: Cliffwater Direct Lending; for Senior Loans: S&P/LSTA Leveraged Loan; for High Yield: Bloomberg U.S. Corporate High Yield; for Private Real Estate: NCREIF ODCE; for Public REITS: MSCI U.S. REIT; for Corporates: Bloomberg U.S. Corporate Bond; for Investment Grade: Bloomberg U.S. Aggregate Bond; for Large Cap Equities: S&P 500; for Municipal Bonds: Bloomberg Municipal; for Treasuries: Bloomberg Intermediate Treasury. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of, future events or results.
Joe Zidle: Facing the Income Challenge
Blackstone Private Wealth Solutions’ Chief Investment Strategist explains possible portfolio adaptations in a yield-starved world.
Income: A Scarce Resource
Finding potential sources of income can be challenging in today’s market – private alternatives may help
Matching Private Alternatives to Common Investment Goals
Individual private alternative asset classes may be deployed in pursuit of specific goals.