COVER STORY
Autumn Campbell , a senior lead planner at RIA Facet Wealth , says her firm lowered the average maturity of corporate bonds .
to buy the dips . And right now , with money market funds at 5 %, we ’ re being paid to be patient .”
Looking To Private Markets
From an offensive perspective , Navarro says he ’ s torn up the 60 / 40 playbook and looks more at private credit investment , which he feels allows him to “ paint with a broader brush ” since it offers a different risk-return profile than Treasurys do .
Because banks are continuing to retract from the market , private credit investors are able to get call protection and other covenants that make the asset class less risky , he says . And within private credit , Navarro says he ’ s partial to infrastructure deals .
“ Infrastructure hits all three buckets ,” he says . “ It hedges against inflation , has very predictable cash flows and offers diversification . In addition , there ’ s a modest correlation with equities and negative correlation with public debt .”
The private equity secondary market is another place Navarro sees new opportunity . Now that interest rates have risen and the cost of capital is so high , just being a liquidity provider is an attractive position to be in .
Limited partnerships , he says , “ need to take out money to deploy elsewhere . If you look back in history to ’ 01 , ’ 08 , the endowments and pension funds learned that this isn ’ t a time you want to hide under the mattress . These are vintage years , and secondaries are allowing them to go to the market .”
Only commercial , office and retail real estate is offlimits , Navarro says , even though there are opportunities for distressed investing . “ We ’ re not touching that ,” he says . “ We ’ ll let someone else do it .”
Ablin says Cresset is also a big believer in private investments . “ Our diversified income portfolio is
30 % in private investments — 20 % in private credit , 10 % in equities . Currently , we have 10 % of our growth allocation in private equity secondaries , but I think we ’ ll expand that allocation to include other private equity and broaden that out to 20 %. Our aspirational strategy is heavily weighted to privates : We ’ re big believers in public market beta and private market alpha .”
However , he adds , “ We prefer not to get involved in public market investments in private wrappers , like hedge funds and LPs .”
He says that in the last year Cresset has decreased its allocation to private credit now that interest rates seem to have stabilized . “ Floating-rate debt is earning a pretty generous yield . We like new-issue , underwritten middlemarket private-credit investments .”
Different Levers With Fixed Income
On the fixed-income side , Navarro says he ’ s happy with his “ bulletproof ” municipal bond ladder that now extends out 12 years . “ With free cash flow producing income , municipal bonds and core real estate , we think we have lots of different levers in the portfolio that should provide opportunities for appreciation down the road .”
Kevin Grogan , the chief investment officer for Buckingham Strategic Wealth in St . Louis , says his firm works mostly with clients who have $ 1 million to $ 10 million in investable assets . Most are either in retirement or in the years approaching retirement . For these individuals
“ At the highest , strategic level , the increase in general interest rates changed our capital assumptions and planning for many of our clients .”
in particular , higher rates have changed the firm ’ s view of fixed income .
“ At the highest , strategic level , the increase in general interest rates changed our capital assumptions and planning for many of our clients ,” Grogan says . “ Rewind a year and a half ago , and retirees couldn ’ t earn anything on fixed-income investments that were very safe . Now that rates are higher , that changes the planning that we can do .”
Continued on page 57
KEVIN GROGAN Buckingham Strategic Wealth
PHOTOGRAPHY COURTESY OF THE INVESTMENT SPECIALISTS JUNE 2023 | FINANCIAL ADVISOR MAGAZINE | 39