Wealth Outlook 2024 - Slow then grow

Alternative investing in 2024 43 Wealth Outlook 2024 | Portfolio views FIGURE 1 Performance of global equity versus amix of private equity and real estate Private illiquid Global equity Cumulative returns (%) 6,000 4,500 3,000 1,500 0 1990 1995 2000 2005 2010 2015 2020 Source: Citi Global Wealth (“CGW”) Global Asset Allocation team, as of October 31, 2023. The returns shown were calculated at an asset class level using indices and do not reflect additional fees or expenses, which would have reduced the performance shown. Indices are unmanaged, may or may not be investable, and have no expenses. Diversification does not ensure against loss of investment. Chart displays the performance of the Global Equity asset class, consisting of 90% Developed Market Equity (MSCI World Index and CGWGlobal Asset Allocation team data) and 10% Emerging Market Equity (MSCI Emerging Markets Index and CGW Global Asset Allocation team data), compared to a private illiquids proxy of 65% Private Equity (Cambridge Associates LLC US Private Equity Index and CGW Global Asset Allocation team data) and 35% Real Estate (FTSE EPRA Nareit Global Index and CGW Global Asset Allocation team data) for the period 1986-2022. Private equity and real estate indices are net of manager level fees and expenses. See Glossary for definitions. Past performance is no guarantee of future returns. Real results may vary. Alternative investments come with their own additional risks, including liquidity constraints and the potential for asymmetric losses from the possible use of leverage. Nevertheless, reconsidering your approach to constructing a core portfolio that includes a higher allocation to alternatives has some opportunities: • Private equity and real estate have generated more wealth over time than a portfolio made of exclusively public equities ( FIGURE 1 ). See our Opportunistic section, Investing with and in unregulated financial companies on page 71 , for an explanation of some of the larger, structural issues creating opportunities for private equity firms today. • When markets become more volatile, hedge funds have historically proven able to preserve capital better than long-only strategies, with certain funds capable of producing positive returns during negative market periods ( FIG URE 2 ). That said, they are also subject to potentially higher volatility, can see limited redemptions and can change the risk profile of your portfolio. • Alternative credit strategies, a subset of private equity or hedge funds, can potentially generate a yield premium over traditional fixed income portfolios. At a time when bond yields themselves are higher, the payouts for non-traditional credit can be higher for those willing to stay invested for the long-term. Just understand that, unlike with traditional bonds, there are no regular coupons.