Alternative Investments

Go beyond public markets, and add new sources of return.

Unlock Private-Market Potential

Public stocks and bonds capture headlines, but they account for only a slice of global capital. Private equity funds own middle-market manufacturers and software firms you’ll never see on an exchange. Direct-lending vehicles finance companies when banks won’t. Institutional real-estate partnerships collect lease checks from warehouses, data centers, and medical offices. Managed-futures programs trade global markets long and short, seeking crisis-period gains. Together these “alternatives” form a toolbox for investors who want sources of return that do not rise and fall in lockstep with the S&P 500.

Inside the Private-Market Toolbox

Illiquidity premia. Investors willing to tie up money for five to ten years may earn a premium because private sellers value certainty of capital more than daily liquidity.
Collateral-backed income. Private-credit funds lend against equipment, invoices, or real estate, often at floating rates that adjust upward when interest rates rise.
Inflation defense. Core real-estate holdings (multi-family, logistics, healthcare) tend to reprice rents every one to three years, passing some inflation through to investors.
Crisis convexity. Systematic managed-futures strategies have historically produced positive returns in severe equity sell-offs by riding trending downside moves in equity, bond, or commodity futures.

Falcon’s Due-Diligence Lens

The alternative universe is wide, but quality varies dramatically. Falcon screens every opportunity through four checkpoints:

Manager pedigree. We prefer teams with multi-cycle track records, audited prior funds, and operational controls that separate portfolio management from fund administration.
Fee transparency. Carried interest and performance fees are modeled against realistic return assumptions; if projected net alpha does not clear a pre-set hurdle, we walk away.
Liquidity windows. A seven-year private-equity lock-up can be appropriate for retirement assets but dangerous for funds needed to buy a vacation property in three years. We match lock-ups to spending horizons before a dollar is committed.
Tax treatment. Potential K-1 delays, unrelated-business-taxable-income (UBTI) exposure in IRAs, and depreciation schedules are mapped in advance so clients know when paperwork, and cash obligations, will arrive.

Only managers that pass all four gates enter the Falcon platform, and each mandate receives an annual re-underwriting to confirm nothing material has changed.

Fitting Alternatives into Your Plan

Because private investments can be illiquid and reported on a lag, we cap their weight within the bounds set by each client’s Investment Policy Statement. A typical allocation might be:

Capital calls and distributions are tracked on the same dashboard as public holdings. When a fund issues a capital call, we know weeks in advance and raise cash from the most tax-efficient source. As investments mature, returned capital flows either to the next vintage or back into liquid sleeves, depending on market conditions and liquidity needs.

Upside Without the Whiplash

Enhanced risk-adjusted return. By adding assets whose drivers differ from public markets, the overall portfolio may earn comparable returns with lower volatility.

Smoother ride. Private valuations report quarterly or semi-annually, muting day-to-day noise and reducing the temptation to time exits.

Institutional access. The same strategies long used by university endowments and foundations become available to individual investors, without requiring nine-figure checks.

Know the Risks Before You Commit

Alternatives are not magic. Valuations can lag reality, masking risk until a markdown arrives. Fees are higher than index funds. Illiquidity means you cannot change your mind mid-cycle. Falcon’s disciplined sizing, manager vetting, and cash-flow modeling aim to keep these trade-offs in proportion to the benefits.

A Yield Strategy That Delivered

In 2018 a couple allocated five percent of their portfolio to a private-credit fund specializing in senior-secured loans to lower-middle-market companies. The fund paid quarterly distributions averaging 8.2 percent annualized, most of it shielded by accelerated amortization of origination fees. When policy rates spiked in 2022, coupon payments reset higher, helping offset equity declines. The illiquidity was acceptable because the couple’s next major expense, a second-home purchase, was eight years away, comfortably beyond the fund’s target life. Results vary by manager and vintage, but the case highlights how a thoughtfully sized alternative can complement liquid holdings.

Curious how alternatives could lower your portfolio’s volatility?

Alternatives can strengthen a portfolio, but only when they serve a clear purpose, charge fair fees, and match your liquidity horizon. Falcon’s process identifies which, if any, private strategies fit your objectives and integrates them seamlessly with the rest of your balance sheet.

Next step: Schedule a complimentary assessment to see how private equity, credit, real estate, or managed futures might enhance, or complicate, your current allocation.

Disclosure

Falcon Wealth Planning is a fee-only Registered Investment Adviser. Advisory services begin only after a client signs an agreement and receives required disclosures. Past performance does not guarantee future results. Private investments carry liquidity, valuation, and regulatory risks. All investments involve the possibility of loss. Tax treatment varies by jurisdiction and should be reviewed with qualified professionals.