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Think Like an Endowment

While many investors (and their advisors) still think about investment portfolios in terms of cash, stocks, and bonds, a growing number of investors and advisors have expanded their investment universe to include non-traditional investments, often called “alternatives”. The primary benefit of using non-traditional investments in a portfolio is to augment the risk-adjusted returns provided by a common stock-bond portfolio. This strategy is commonly referred to as taking an “endowment approach” because the endowments of large universities were early adopters of non-traditional investments.

As an example, as of June 30, 2015, Harvard University’s Endowment was valued at $37.6 billion, making it the single largest university endowment. Below outlines Harvard’s asset allocation shifts over the years[1]:

As can be seen in the table above, the percentage allocation to non-traditional investments increased from 25% in 1995 to almost 57% by 2014.

Harvard University Endowment’s annualized performance over the last 10- and 20-year periods ending June 30, 2015 was 7.6% and 11.8%, respectively, as compared to a standard 60% stock / 40% bond portfolio (using the S&P 500 Index and the Barclays Aggregate Bond Index), which provided 6.8% and 7.9% average annualized returns over those same time periods[2].

[1] Source: Harvard Management Company Annual Report 2015.

[2] Source: Harvard 2014 Annual Report.

Access to Syndicated Real Estate Investments

As experts in syndicated real estate investments, Atomi Financial Group offers its investors access to institutional grade real estate asset classes including but not limited to:

  • Multi-Family

  • Office

  • Retail

  • Industrial

  • Senior Living

  • Single Tenant (NNN)

Benefits of syndicated real estate investments

  • Flexible investment sizes

  • Pre-arranged financing

  • No management hassles

  • Potential increased after-tax cash flow

  • Economies of scale

  • May be quickly identified and closed in a timely manner

Risks / considerations

  • Interests in real estate may involve a high degree of risk

  • Some real estate investments, in particular Tenants-In-Common (TICs), are subject to recourse liability

  • Investments are often leveraged, which may increase risk

  • Real estate investment sponsors have broad discretion over property management and financing decisions

  • Fees paid to the real estate sponsor and its affiliates may be significant

  • There are no guarantees regarding cash distributions or performance

Purchasing / funding

Investors typical purchase syndicated real estate one of the following ways:

  • Non-Qualified Cash. By using non-qualified cash to purchase a syndicated real estate investment, the investor has the opportunity to defer capital gains, as well as earn tax efficient distributions.

  • Qualified Cash. Using qualified cash, such as monies inside an IRA account, does improve the tax efficiency of the money invested. Additionally, investors who purchase real estate with leverage should be aware they may be subject to Unrelated Business Interest Tax (UBIT).

  • Section 1031 Exchange. Explained in greater detail in our Section 1031 Section, investors who elect to complete a 1031 Exchange in order to purchase syndicated real estate have the opportunity to defer capital gains on the sale of their current real estate holdings.

Financial planning for real estate investors

Atomi Financial Group offers advanced financial planning services that integrates real estate investing with other more traditional areas of planning, such as fee-based money management, securities, and insurance. Your real estate financial plan will cover:

  • What types of real estate are appropriate for you?

  • When does it make sense to acquire / dispose of properties?

  • What is a suitable amount of risk per property and overall?

  • How to balance appreciation potential with current income?

  • How to maximize tax benefits?

  • How to leave real estate to heirs and beneficiaries?

This is neither an offer to sell nor a solicitation of an offer to buy any security. Such an offer may only be made by means of an offering document that must accompany or precede this information. All investments have risk including loss of investment; please see the risk factors section of the offering document.  Other risks in these type of investments include, but are not limited to: Not suitable for most investors, need accreditation status, the fact that they are illiquid with no secondary market, and the fees and expenses connected to these investments might outweigh any tax benefits.

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