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Investing in Alternative Investments: Mortgage Pools

By Leonardo Rostoker and Michael J. Seiler

Traditional investments such as the stock market have witnessed unprecedented volatility in recent years. Since January, families have seen their life savings decrease by roughly 25 percent. Employees gearing up for retirement now have to delay their plans to spend more time with family and travel the world.

Rising interest rates have put downward pressure on bond prices, so this second traditional investment path is also unattractive.
Should investors keep their money on the sidelines in cash and wait for the economy to correct and then start to recover? This could take years. And with inflation spiraling out of control, with every month that passes, wealth stored in cash will continue to lose purchasing power at a rate not experienced in 40 years.

The disappointing performance of traditional investments has encouraged a broadening of portfolio asset consideration to include
“alternative investments.” Real estate often is described as falling into this category despite the fact that the total market capitalization of residential and commercial real estate is roughly equal to both the stock and bond markets. Unlike shares of common stock, real estate assets are unique, illiquid, lack divisibility, have higher transaction costs, fewer numbers of buyers and sellers, a more gradual price discovery process, and mostly trade in private markets. Because all these characteristics reflect a less efficient market, opportunities to identify abnormal returns are far more possible in the real estate world, given the right investment team.

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For more information please contact Matthew T. Sheridan at Matthew@SpotlightFamilyOffice.com.