Adam Bobker, Co-Head of Global Wealth Solutions for Fortress, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss the increasing availability of alternative investments to accredited investors.
After a long career at Blackrock, Bobker joined Fortress to build relationships with intermediaries in the private wealth community. Fortress evaluated their private market funds and built new structures providing access to accredited and mass affluent investors and their advisors.
For many years, the correlation between stocks and bonds was relatively low, allowing the 60/40 portfolio to provide risk reduction and diversification potential. In crisis markets, such as 2022, correlations between stocks and bonds rise, which increases risk and reduces the diversification potential. Fortress provides education to advisors on the role of a 20% allocation to alternative investments in a portfolio invested 50% in stocks and 30% in bonds. Alternative investments can potentially hedge volatility, increase income distributions, and increase diversification through less correlated asset returns.
For the last three years, Fortress has been building a team with experience in working with advisors in the wealth channel, including those at RIA firms and wire houses. Some advisors use both the public and private markets when building portfolios, such as increasing exposure to broadly syndicated loans after a time of widening credit spreads even though they are invested in private direct lending. This is pivoting from public to private investments are one becomes more attractive than the other at various points in the cycle.
Today, Fortress sees opportunity in real estate sale-lease back transactions. Some corporations may wish to sell real estate rather than incur debt at today’s rising levels of interest rates. The real estate is sold and the corporation remains in the space with a long-term lease. This frees the proceeds from the real estate transaction to be reinvested into the core business while limiting the issuance of new debt on the balance sheet. Banks are retreating from providing capital for both real estate equity and debt. For 25 years, Fortress has been a capital solutions provider by buying loans from banks or making loans to borrowers that don’t have access to the shrinking availability of bank loans.
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