Over the last two centuries, about 90 percent of the world's millionaires have been created by investing in real estate. Some investors unlock the value of Real Estate as their homes appreciate in price while others generate money through investment income like we do at Equilibrium.
We look at Real Estate as a long term hold investment that is very tax-efficient and produces great income (or dividend) for the investors that own it. It’s also incredibly recession resilient as people still need a place to live even when the stock market gets hit. We think of Real Estate as a superior bond replacement in the new world where only 20% of all government bonds issued have yields greater than 2%.
Equilibrium’s primary objective is to hold for the long term in markets that exhibit strong fundamentals. Such examples include: a solid employment market, population growth and friendly business environment. Rental income from Commercial Real Estate far exceeds that of the bond market (and most stock dividend yields) while maintaining relative price stability in comparison to public equities.
Volatility is now a measurable asset class that should be considered when constructing a long-term equity investment strategy.
Volatility matters because it provides a way to receive returns from an asset class that is not solely reliant on interest rate policy, dividends, or necessarily price appreciation. Essentially, a seller of volatility can gain an alternative source of income while a buyer of volatility can pay for protection against a market correction.
Equilibrium offers exposure to this unique and emerging asset class by offering a managed solution with an incredible track record in up and down market environments with very low correlation to the S&P 500.
Managed Futures describes a strategy whereby a professional manager assembles a diversified portfolio of futures contracts. These professional managers are also known as Commodity Trading Advisors (CTA’s).
CTAs will often invest in a portfolio of futures contracts consisting of highly liquid, regulated, exchange-traded instruments like:
1) Fixed income futures, such as U.S. treasury notes or treasury bonds.
2) Stock index futures, such as S&P 500 futures or Russell 2000 futures
3) Commodity futures, such as soybean, crude oil, coffee, sugar and gold futures
4) Foreign currency futures, such as Euro FX, British pounds and yen
The beauty of Managed Futures is that there is almost no correlation between this asset class and any other asset on the Equilibrium platform.
There is no argument that the S&P 500 has been a strong driver of returns in the past. However, in the last 20 years there have been two instances of 50% declines in the S&P 500 and many more instances of 20% - 30% drops. These price fluctuations take an emotional toll and when the losses are too great, can even trigger automatic margin calls (forced selling) which are much worse.
Equilibrium allows you to get exposure to the S&P 500 while safeguarding your assets against the worst kinds of market declines. We do this by purchasing insurance on the investment through the options and derivatives market and best of all, we don’t sacrifice the upside of this asset class to protect against the downside.
Through Equilibrium you can unlock access to this sophisticated way of investing in the public markets once reserved to elite hedge funds.
These are basically collateralized loans. Borrowers pledge their Crypto assets as collateral to get a loan.
If they don’t pay it back, the lender can force the sale of their Crypto assets to make them good on their loan. The banking system is not set up to issue loans against this type of collateral which makes it possible to earn substantially higher rates even when it is securitized against an asset. This is a fantastic income stream with very high yields.
Equilibrium opens this world by lending capital in exchange for a relatively high interest rate while maintaining strong collateral security in the form of digital currency.
“Crisis Alpha” is a relatively new label in the financial industry used to describe investment strategies designed to generate positive returns during equity market panics. Crisis Alpha strategies can range from short-focused hedge funds and trend following CTAs to specialized “Black Swan” tail risk protection products. Equilibrium will focus on generating crisis alpha using VIX futures and options.
Like any insurance product, VIX derivatives have a cost associated with their use. Especially when using these products, seekers of Crisis Alpha must be cognizant of this cost which can be substantial while the equity markets are not experiencing a shock. If not properly managed, accumulated losses from “always on” protection in VIX can easily outweigh the benefits delivered during the next equity dislocation. It is one thing to deliver alpha during a crisis, but if the overall costs outweigh the benefits, the position may not make sense for an investor’s portfolio.
Equilibrium makes it easy to gain access to this managed “stock portfolio insurance” so your portfolio isn’t at risk when the next big downturn happens.
When regulations were put on banks after the 2008 Global Financial Crisis, a new lending market was created for non-bank entities. With high-yielding opportunities in public markets being few and far between, investors explored new strategies. Private credit includes any debt held by or extended to privately held companies. It comes in many forms, but most commonly involves non-bank institutions making loans to private companies or buying those loans on the secondary market.
Private debt funds come in different shapes and sizes. For example, some provide capital to sponsor-backed borrowers, others fund real estate development projects, and some invest entirely in the debt of distressed companies.
Equilibrium provides access to this emerging asset class by investing in the best managers in the space and providing a “true” fixed income return in a low yielding world.
Hedge funds are alternative investments using pooled funds that employ different strategies to earn active returns, or alpha, for their investors. Hedge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).
Each hedge fund is constructed to take advantage of certain identifiable market opportunities. Hedge funds use different investment strategies and thus are often classified according to investment style. There is substantial diversity in risk attributes and investments among styles.
Equilibrium makes it easy to invest in this asset class by vetting strategies and managers and doing the legwork to build a robust portfolio of strategies and non-correlation for maximum diversification.
Private equity is an alternative investment class that is not listed on a public exchange. Private equity invests directly in private companies. These can be companies like a small cash flowing widget maker all the way up to a large multinational business that is being delisted from the public markets and taken private.
Equilibrium invests in profitable, “boring” businesses in order to generate substantial cash flows. In a world where bond yields are zero and there is a need for consistent income, Equilibrium uses Private Equity as a bond / income replacement with appreciation being an added bonus.