An obscure alternative investment that was discussed at the conference is private life insurance. Private placement variable life insurance provides a tax-advantaged structure that maximizes investment values while providing significant life insurance benefits.
The vehicle offers exposure to a variety of asset classes, including alternative investments, within a life insurance structure. Investment gains accumulate on a tax-deferred basis while delivering an economic benefit upon the insured's death. Policyholder assets can be accessed through policy loans.
Another conference panel explored structured investments, which are notes or CDs with specific payout profiles based on the performance of a variety of underlying asset classes, and they are payable at maturity. Underlying assets can include equities, commodities, foreign exchange and products tied to the Libor rate that banks charge each other for loans.
Proponents say it's a way for investors to get exposure to various asset classes they normally might not have easy access to, and without holding the underlying securities. They also protect principal (upon maturity) and tailor risk to the individual investor.
Their risks include the credit risk of the issuer, their lack of transparency and a lack of principal protection until maturity. Also, they are complicated vehicles.
Nonetheless, gross sales of structured investments in the U.S. are expected to grow 20% this year, according to Arete Consulting.
The conference's featured speaker on the first day was Jeffrey Gundlach, CEO and CIO of DoubleLine Capital. Gundlach focused on macoeconomic issues, asserting that a huge change in government policy encompassing higher taxes and reduced entitlements is coming.
The featured speaker during lunch on the second day was Richard Bernstein, former chief investment strategist at Merrill Lynch and current CEO of Richard Bernstein Advisors LLC. He sprung a few fun facts on the audience, such as that the S&P 500 has outperformed equities in the BRIC countries of Brazil, Russia, India and China during the past three and a half years.
Bernstein, a noted pessimist during his last ten years at Merrill Lynch, which ended in 2009, sounded positive about the U.S. markets. For starters, he said, the U.S. has the steepest yield curve--which he noted is a major positive sign--and the strongest corporate profits among major economies. He acknowledged that the corporate sector has benefited disproportionately from the recovery even as Main Street has lagged, but he said U.S. companies are leading the world in revenue surprises (even if a lot of that comes from exports).
Bernstein was particularly bullish on U.S. small-cap companies. That didn't have anything to do with alternative investments, but then again, a well-diversified portfolio should include a range of asset classes.