Three Dimensional Investing

Many investors and wealth managers remain stuck in a two-dimensional asset allocation model comprised of stocks and bonds. But the real world isn’t 2D and investors need to “embrace complexity” to thrive today, said CIO of Endowment Wealth Management, Inc., Prateek Mehrotra, MBA, CFA, CAIA.

What really needs to change is the fact that the world has become more complicated. Investment portfolios should embrace the complexity,” Mehrotra told Advisors Magazine during a recent interview. “The traditional world of 2D asset allocation of stocks and bonds needs to change, it really needs to evolve towards the Endowment Model.”

Endowment Wealth Management® based in Appleton, Wisconsin, with offices in Chicago and Milwaukee, develops investor portfolios based on the Endowment Investment Philosophy®, which is similar to how universities manage their funds. The Endowment Model is “three-dimensional” in that it incorporates equities, bonds, and alternative investments such as private equity, real assets, and hedge funds, Mehrotra said.

“If you’re just investing in public equities, it’s a shrinking universe of companies that you can allocate to,” he said. “There are more than 200,000 private businesses and there are about 4,000 publicly traded companies. So, if you’re not offering your clients the ability to invest in private businesses then you’re missing a good chunk of the investable universe.”

The Endowment Investment Philosophy is guided by the Endowment Index® to create objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $500 billion in total assets. The index includes 19 sub-indexes that are investable, and contained within those sub-indexes are over 30,000 underlying global securities.

Endowment Wealth Management® does not require a minimum investment from prospective clients. The firm offers solutions for investors anywhere on the wealth spectrum, from do-it-yourself solutions via for millennial investors to complex allocations utilizing illiquid assets for clients possessing more than $1 million in investable funds.

The professional team at Endowment Wealth Management® will educate clients how the Endowment Model works and what their money can accomplish if properly allocated. They are a Registered Investment Advisory (RIA) firm and a fiduciary, meaning clients’ interests come first.

Investors need to break away from “simplistic, rudimentary 2-D portfolios” of stocks and bonds and instead move toward the more complex 3-D Endowment Model because it can offer both higher absolute and risk-adjusted returns over a sustained period, Mehrotra said.

“Equities where they are today, where they’re priced today, will not likely deliver that 8-10 percent type of return over the next ten years,” he said. “Bonds where they’re placed today will not likely deliver that 6 percent return, so to get to that 7 or 7.5 percent return, one really needs to look at the endowment approach.”

For more information on Endowment Wealth Management, Inc., visit:


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