Institutional Investing for Individual Investors

The team at Wall Street Luxury recently spoke with Edward Papier, Founder of Amadeus Wealth Alternatives. Owing to a volatile stock market and the potential for both stock and bond market corrections as interest rates rise, alternative investments have become increasingly attractive to many investors.?Ed founded Amadeus in 2014 and offers HNW clients a customized portfolio that includes a wide array of alternative investment strategies.

Your Company tagline says “Institutional Investing for Individual Investors, can you please elaborate?

The “endowment model,” created by the late Dr. David Swensen (CIO of Yale University from 1985 until his death in May 2021), started the shift of institutional portfolios (endowments, foundations and pension plans), into illiquid private investments. He is credited with generating $20 billion in excess returns for the university. Today, institutional investors have more than 55% of their assets allocated to alternatives,?largely due to their return potential, diversifying power and lower volatility.?Historically, the minimum investment for access to alternatives might have been $10 mm.?Today however, individual investors can access similar strategies with as little as $100,000, hence the tagline.

What are 5 things you believe investors should?be aware of when investing in alternatives?

They are less correlated to the public markets, sometimes significantly;?they can be illiquid for anywhere from one year to ten years depending on the strategy; some strategies can have a “J” curve; some can have UBTI (Unrelated Business Taxable Income); with respect to carried interest, a European Waterfall is preferable to an American one. In a European equity waterfall,?sponsors do not receive carried interest until all of the limited partners’ capital contributions – including unrealized investments – have been recovered and their preferred rate of return has been reached. In an American waterfall,?sponsors receive carried interest from individual investments in the fund before limited partners are made whole.

How many different kinds of alternative strategies do you follow?

Categories include private debt, private equity and real estate on a primary and secondary basis, equipment, aircraft and containership leasing, direct and co-investments, venture investing, direct secondaries, options trading (to hedge long positions), multi-alternative, General Partner interests, litigation finance, energy, and other special situations

What are some of the most unique and highest returning strategies you follow?

The highest returning strategy I have recommended was a multi-family housing project in Portland Maine, but at 55% annualized, that was an outlier for real estate.?Those kinds of returns are more likely found with venture when they succeed, but the latter are obviously higher risk.?One unique investment I recommend is a 14% one-year loan structured as a bond with a make whole provision if the bond is called early and an option to convert to tax-except financing at 9% at maturity.?

Where do you believe we will see the best returns over the next 12 months?

Private credit, private market secondaries, short positions, co-investments, venture debt, depressed real estate.

If you would like to learn more about institutional investing for individuals in alternatives join Ed for live webinar on June 6 @ 1pm where he will share more about asset allocation, tracking, and performance measurement.

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