Wealth Outlook 2024 - Slow then grow

42 Wealth Outlook 2024 | Portfolio views Alternative investing in 2024 Considerations: • Alternatives have the highest next- decade return estimates among all of the asset classes in our proprietary asset allocation methodology – and have for the past three years. • The potential for enhanced returns and lower volatility is one of the benefits that a diversified exposure to hedge funds, private equity and real estate may provide for qualified investors. • When investing in alternatives, it is important to understand the liquidity constraints and added risks involved, and why patience is key. • Close consultation with a financial professional can help you choose the appropriate alternatives path for you. • The Global Investment Committee (GIC) suggested allocation for a qualified and suitable moderate-risk investor to alternatives is 12% to hedge funds, 10% to private equity and 5% to real estate and we have provided this roadmap to get you started. Citi Global Wealth has deep capabilities across alternative investments and has multiple analytic tools available to assist you in holistically evaluating portfolio goals and risk tolerance. With alternatives having some of the highest Strategic Return Estimates (SREs) among all the asset classes in our Adaptive Value Strategies (AVS) framework over the next 10 years, our suggested allocation for an appropriate moderate-risk investor is, in the aggregate, 27%: 12% of the portfolio to hedge funds, 10% to private equity and 5% to real estate for those who understand the level of illiquidity that may be added to a portfolio. We should note that, while prospective returns for alternatives are high, these are also the same expectations and weightings we have recommended for the last three years. If 27% sounds like a lot to you, consider that alternatives allocations among US institutional investors in 2022 ranged from an average of 34% for state and local pension plans¹ ¹ Center for Retirement Research at Boston College as of 31 December 2022. to 59% for endowments.² ² 2022 NACUBO-TIAA Study of Endowments, published February 2023. Although certain subsets of our clients such as large family offices³ ³ Citi Private Bank’s Global Family Office Group considers a single- family office to have US $250million+ net worth and one or more dedicated professionals covering i. a portfolio of assets/investments & liabilities; ii. legal matters; iii. finance and accounting; iv. trusts and tax planning; and/or v. philanthropy and foundations. are adopters of alternative assets in their portfolios, with the average large family office allocation sitting around 46%,⁴ ⁴ Citi Private Bank Global Family Office Survey Insights Report 2023. allocations to alternative investments by other qualified individual investors remain by and large lower than they should be, in our opinion, with most in the single digits.