This only gives a glimpse into the CEO’s analysis. Even so, the forecast numbers are brutal. By and large, Nicola agrees with this dire prediction and insists that future returns for any asset class will always be less than ideal given a high valuation.
“It can be easily argued that based on current prices, the stock, bond and real estate markets are expensive,” he said. “However, when it comes to public equity markets, we don’t invest in countries. We invest in companies and are not limited to public markets. Long-term bonds aren’t the only way to effectively invest in fixed income assets. Real estate can offer strong future returns if you find ways to add real value. “
So what is Nicola doing differently – and how does it suggest addressing this future return problem? Instead of the 60-40 model – or variations like 50-50 or 80-20 – the company is opting for an institutional approach that combines public market assets like stocks and bonds with private assets like real estate, infrastructure and private debt and private Equity.
Retail investors have been able to implement this approach through a simplified method called Talmudic Asset Allocation, which is defined as such by Pinnacle Advisory: let each man split his money into three parts and invest one third in land, one third in companies, and thirdly let keep him in reserve with him.
Nicola stated, “In today’s investment world, this becomes a third of the companies, presumably both private and public, a third of the reserves that can be considered gold. For us, however, these are fixed income securities so interest can be earned a third on the land, which means income generating real estate. “