Ellis said people also are beginning to think of the risks of the equation when they think of equity. He cited a chart showing Northern Trust’s five-year annualized real assets return forecast, which focused on natural resources, global real estate and global limited infrastructure. Ellis said these assets have promised returns in the past but have disappointed. He said if you take the returns on these three assets and run them “on an equal dollar-weighted basis back to 2014, the total return of the covert annualized is just shy of 4%. That feels very fixed-income-like,” he said.
And in terms of implementing investment means across large asset pools, Ellis said focusing on core themes and understanding growth are the elements on which all billionaires’ portfolios should be built.
He said Northern Trust’s themes of growth, monetary policy and inflation have resonated well with family offices in how they have been thinking about positioning their portfolios. “They have been shifting away from passive fixed income and reorganizing their risk-based assets into more private vehicles,” he said.
As an example of where themes are meeting implementation, Ellis explained that technology and healthcare are a barbell approach with private and public equity. Other alternative forms of return are modest, and fixed income has all but left the building, he said.
But real estate is real, he said, noting that billion-dollar-plus families have for many years had an interest in physical real estate. “And the dislocations we have seen in the post-Covid environment really do seem to suggest opportunities again to reimagine things in that space.”