{"id":20374,"date":"2022-10-31T19:00:00","date_gmt":"2022-10-31T19:00:00","guid":{"rendered":"https:\/\/pws.blackstone.com\/emea\/?post_type=insight&p=20374"},"modified":"2024-08-02T02:24:31","modified_gmt":"2024-08-02T02:24:31","slug":"private-alternatives-a-core-allocation","status":"publish","type":"insight","link":"https:\/\/pws.blackstone.com\/emea\/education-insights\/article\/private-alternatives-a-core-allocation\/","title":{"rendered":"Private Alternatives: A Core Allocation"},"content":{"rendered":"\n\n\n
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Blackstone\u2019s long history of outperformance and capital protection extended in the third quarter even amid further market sell-offs. The S&P 500 dropped an additional 5%, bringing the year to date decline to 24%; the public REIT index was down 10% in the quarter and 28% year to date; and in debt markets, investment-grade and high-yield bonds declined 14-15% in the first nine months of the year.1<\/a><\/sup><\/p>\n\n\n\n

This year\u2019s steep declines in stock and bond markets, the worst in roughly half a century, revealed cracks in the 60\/40 portfolio, and have many rethinking portfolio allocations.2<\/a><\/sup> Blackstone has long believed that alternative investments could serve as foundational building blocks for both institutional and private wealth portfolios, which may provide yield, inflation protection and a lower level of volatility.3<\/a><\/sup> Sophisticated institutional investors typically maintain core private allocations of 15%-50%, tailored to their goals and parameters around return, liquidity and risk. Private wealth individuals have been increasing their allocations but remain well below these levels.4<\/a><\/sup><\/p>\n\n\n\n

For those who are rethinking the core portfolio, where to begin? Finding a steady hand in unsteady markets, for starters.<\/p><\/blockquote><\/figure>\n\n\n\n

Blackstone can attribute its outperformance to its strategic investments in companies, properties and floating rate credit that are well positioned in a rising rate, inflationary environment, and sound management through an economic slowdown or recession. Most of the firm\u2019s real estate investments are in sectors with supply-demand imbalances, where rent and therefore cash flow growth have stayed ahead of inflation. In both private equity and credit, the firm\u2019s emphasis has been on sectors and companies with secular tailwinds and minimal input costs. While no investor can be completely immune to market and economic conditions, Blackstone has worked hard to create investment portfolios that are well positioned to weather the storm.<\/p>\n\n\n\n

Even during the bull market that preceded this year\u2019s volatility, allocations to alternatives such as real estate, private credit, and private equity could serve as core portfolio holdings, as indeed they have for decades for many institutional investors.5<\/a><\/sup> On average, these alternative asset classes improved returns, dampened volatility, and increased the yield of a conventional stock-bond portfolio.6<\/a><\/sup> We believe this is not a new phenomenon. Only the market environment and the rising attention to these asset classes qualify as new.<\/p>\n\n\n\n

For those who are rethinking the core portfolio, where to begin? Finding a steady hand in unsteady markets, for starters \u2013 seeking managers who have the firepower, scale, rigorous underwriting standards and expertise in complex transactions to deploy capital in a way few others can. Those who have the staying power and have built durable capital structures to navigate through challenging economic and capital markets environments.  Finding managers with extensive track records across multiple cycles. Working with managers who have garnered trust and built their reputation on that trust through their actions, who serve clients with excellence.  This is all what Blackstone strives for, and it is what we believe the firm has delivered to its investors.<\/p>\n\n\n\n

Spotting Trends Early: Blackstone’s Inflation Call Featuring Jon Gray, President and COO of Blackstone<\/h2>\n\n\n
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