Covid-19 has had a profound and unprecended effect on the global economy, and recent trading activities by retail investors demonstrate that conventional markets remain highly volatile. This is the third feature in a series that considers alternative assets, both old and new:
Making a mint? Rare United States coins prove a resilient, thriving asset
A new port of call for investors? Fine wines as an alternative investment
Paul Mershon is the founder of Arizona-based Silverhawk Private Wealth, an SEC Registered Investment Advisory company with a difference.
Mershon advocates a truly diversified portfolio and an investment strategy based on a three-pronged (TRIA) approach. Rather than looking at the traditional formula of investing in stocks and bonds, Silverhawk takes a more nuanced, research-based approach, looking at different sectors that represent alternative investments with a historically solid return.
The TRIA Formula™ rests on a fairly conventional wisdom: spread your eggs across many different baskets, i.e. CORE investments, Opportunistic Investments, and Risk-Protected investments.
‘Core investments’ are, as the name suggests, investments in the publicly traded markets (equities).
The stock market has been on a roller coaster all of 2020 and there are, according to bears, some signs of a bubble. A ‘black swan’ event triggers a sell-off, even if savvy investors with deep pockets do buy in a down market.
This is one reason why Silverhawk looks for more ‘unique baskets’ that people can put their proverbial eggs in.
‘Opportunistic Investments’ are varied and fall broadly in the category of high performing assets. These can range from rare cars and rare coins, to industrial real estate, cloud storage facilities (“why invest just in Google shares”, say Mershon, “when you can invest in the logistical side of tech”), mineral rights and oil wells (as opposed to just oil shares), and others that deliver superior returns.
‘Risk protected investments’ are protected against downsides and offer a more conservative but committed return over a period of time when your capital is effectively tied up but secure.
The overarching goal is performance combined with broad exposure to different markets, and the objective is to insulate clients from loss and increase Alpha through diversification.
Warming to the subject of alternative and opportunistic investments, Mershon points out that demand for warehousing and onshore logistical hubs is not only trending but set to rise exponentially.
Spiralling online shopping is fuelling demand for industrial and storage space and cross-dock facilities, which creates an opportunity for the investor prepared to consider alternatives to stocks and shares.
These investments benefit from low interest rates and are protected to some extent from equity market fluctuations, with no steep decline in sight, says Mershon.
Two of the most interesting alternative assets his company advocates are rare coins and rare cars.
Silverhawk works with Michael Contursi, CEO of Contursi Rare Coins, who advises on the former and with Russo and Steele Car Auctions who advise on the latter.
In fact, the interest in rare car investments came along opportunely – Silverhawk was a regular attendee of the car auctions and was briefed on the scarcity value of some specific vintage classic cars, of which there is a finite number. As is the case with the finest vintage wines, no more cars of a particular vintage will ever be made – or they wouldn’t be original. This makes them an excellent investment diversification asset with a demonstrable increase in value.
One only need to take a cursory look at the Hagerty Insurance company value tracker to ascertain that between 2010 and 2021 this blue chip asset has appreciated by a staggering 108%.
Silverhawk interacts with clients, both existing collectors and investors, at car auctions.
The company suggests that a 3-6% of clients’ overall portfolio could be held in rare car assets.
Silverhawk works with a number of established experts to provide the research and data and it is then the client’s decision to determine which Opportunities are the best fit for them; whether they want to create a fund and appoint someone to operate it.
“The social and entertainment aspect of investing in rare cars is an added bonus to what is, at its core, both a blue-chip asset, as well as a diversification tool.”
Silverhawk occupies a unique financial advisory space in an industry that is primarily restricted to publicly traded markets. They actively seek to identify opportunistic and non-conventional investments for their clients and rely on reliable third parties research, as well as on their own due diligence. They have been serving UHNW clients with an appetite for unique investment opportunities since 1992.