Future Returns: The Banking Crisis Didn’t Scare Off Alternative Investors

Investing for high-net-worth clients can be a bit of a high-wire act because they can have significant amounts of money tied up in complex alternative investments. When the panic started with the collapse of Silicon Valley Bank in March, wealth manager Tom Ruggie was relieved that none of his clients were directly invested.

“We got lucky there,” says Ruggie, a certified financial planner and author who is based in central Florida. “But when it came to Credit Suisse, we had a little bit of a scare.”

Ruggie’s firms—a family office business called Destiny Wealth Partners and a financial planning firm called Ruggie Wealth Management—did some work with the troubled financial institution on debt obligations. It turned out that all of the contracts were completed, but if Credit Suisse had failed, Ruggie and his clients would have lost a lot of money because the notes would not have been paid back.

Investors who have money in private equity, hedge funds, and direct investments in start-ups are used to taking on a lot of risk and have the financial capacity to absorb it. Ruggie points to an EY study that a third of those with assets above US$250,000 hold some alternatives in their portfolios, including 81% of ultra-high net worth clients with more than US$30 million. Scares don’t happen often, but when they do, “it’s an eye-opening event,” Ruggie says.

Still, rather than run to safety when things turn sour, Ruggie’s clients are more likely to go back and do it again. “They are usually willing to take risks when everyone else is running for cover,” he says. “When you have something come up, like the current banking crisis or the situation in 2008, a lot of people psychologically don’t do well with uncertainty. But the savvy investors, they look at it as an opportunity.”

Here’s where Ruggie says high-net-worth investors want to put their money today.

How Much Risk?

Not all high-net-worth investing is deep in alternatives. Ruggie says he divides client money into three pools: short-term money in fixed income, mid-range money in traditional equity investments like mutual funds and exchange-traded funds, and then long-term money in private investments.

To decide the ratio, he says “it’s a statistical correlation of how much money you have to how much you need and for how long. There’s no cookie-cutter answer.”

Some clients don’t put more than 10% of their net worth into non-traditional alternatives. Ruggie’s personal portfolio is pushing 40% alternatives, he says. Much of that is tied up in sports memorabilia—mostly an extensive baseball card collection—and some collectible wines, along with direct investments in companies.

Non-fungible tokens (NFTs) are a bridge too far—“I personally can’t see the advantage of investing in something like that, and never recommend for a client to do so,” Ruggie says.

As for cryptocurrency, Ruggie has dabbled, but just for the experience. “I wanted to learn,” he says. “I did quite well, but when clients came to us for advice, our guidance was that it’s off our path. Our client base is more concerned about long-term performance than the gambling aspect of investing.”

How Much Capital is Required?

Ruggie says direct investments in companies can start as low as US$25,000. These are the opportunities that are the most interesting to his clients right now, especially technology-based start-ups.

Some clients also take a step back and put their money into private-equity that then pools investments and finds companies worth investing in. Those typically require putting in at least US$250,000 and the purchaser has to be qualified, with a net worth of US$5 million net. Ruggie’s clients also invest in hedge funds, real estate, and collectibles.

Of these investments, hedge funds are the most liquid. There’s usually a lock-in period of a year, but then money can typically be withdrawn with 30-days notice.

Private equity has much less flexibility. “I tell people to basically anticipate no liquidity at all,” Ruggie says. “My mindset on private equity is that this is long-term money.”

The same goes for most direct investments in companies, which aside from the potential to sell stakes on the secondary market, there’s no ability to get cash out unless the company goes public and the shares appreciate.

The Potential Gain?

The main reason for investing in alternatives is that the potential upside of these investments is unlimited.That’s what makes it worth the risk. The other reason is that many high-net-worth clients have money to put on the line.

“What is excess? It’s a correlation between what you have and what you need,” says Ruggie. “Everyone’s definition of rich is different.”

In a year like 2022, advisers like Ruggie have had to go to clients with bad news about losses for the year and say, they may have outperformed the market but still lost 10% or whatever the number. But for Ruggie, that’s a temporary situation with paper losses.

The rest of the speech goes something like this: “It’s my belief—backed up by my personal investments—that what we’re doing with alternatives is going to outperform the market with statistically less risk than the market over time. It will catch up.”

You’re oh so busy. You’re on Slack and email and back-to-back Zoom calls , sometimes all at once . Are you actually getting real work done?

Cal Newport doesn’t think so.

“It’s like, wait a second, none of this mattered,” says the Georgetown University computer science professor and crusader for focus in a distracted age.

Newport, 41, says we can accomplish more by shedding the overload. He calls his solution “slow productivity”—and has a book by the same name —a way for high achievers to say yes to fewer things, do them better and even slack off in strategic doses. Top-notch quality is the goal, and frenetic activity the enemy.

This, he told me, is the thing that can save our jobs from AI and layoffs, and even make shareholders happy.

I had questions. Can we really be less is more at work, or have we grown addicted to constantly crossing endless tasks off our to-do lists? What will our bosses think?

After all, so many of us yearn for a burnout cure-all that will preserve our high-achiever status, and this isn’t the first you-can-have-it-all proposition we’ve heard. Champions of the four-day workweek promise we can ditch an entire workday just by working smarter. Remote-work die-hards swear it’s a win for employers and employees. Few dreams are more seductive than bidding goodbye to hustle culture, while still reaping the benefits of said hustle.

Newport acknowledges that saying no to preserve our productivity can be a delicate act. He knows that entrepreneurs have more flexibility, but says those of us who answer to managers can carve this out too. We might even find we have more power and value to our employers.

“You should take that value out for a little bit of a spin,” he suggests. He offers some pointers.

Less is more

The way we work now is a “serious economic drag,” Newport says. Knowledge workers have devolved into a form of productivity that’s more about the vibes—stressed!—than actually making money for the company. Data from Microsoft finds that lots of us spend the equivalent of two workdays a week on meetings and email alone.

One mistake we make, Newport says, is taking on too many projects, then getting bogged down in the administrative overload—talking about the work, coordinating with others—that each requires. Work becomes a string of planning meetings, waiting on someone from another department to give us a go-ahead.

Newport recommends giving priority to a couple projects, then bumping the others to a waiting list in order of importance. Make that list public, say, in a Google doc you share with bosses and colleagues.

“When workloads are obfuscated behind black boxes, it’s just people throwing stuff at each other, it’s very dangerous to say no,” Newport says.

If someone comes to you with more work, have them consider where it should go on your list, Newport says.

When you do say yes, double the estimated timelines you set to complete a project. That’s how long it’ll take to do it well, he says. And try what he calls a “one for you, one for me strategy.” Every time you book an hour-long meeting, block an hour for independent work on your calendar.

Be the one to trust

It’s a foreign and bracing approach for those of us who reflexively say yes to work requests. Newport’s philosophy requires transparency and confidence. Instead of “let me see how fast I can turn that around!”, try, “This request will take six hours. I’ll have that time in three weeks.”

This could be heresy at some companies. The trick is in the delivery, he says. Never make it seem like work tasks are a burden you shouldn’t have to face. Instead, stress that you’re trying to be as effective as you can for the team and the company. Be positive, and deliver on the timelines you promise. You’ll be seen as someone who’s organised and on top of your game.

We think bosses want someone who’s always accessible—fast to respond, fast to jump into action, Newport says. But what bosses really want is to know that a project they hand you will get done.

Bite-size shirking

Quiet quitting permanently is a bad idea, Newport says, but a little bit is good.

Don’t feel guilty, he adds. You’re working under a new, better system. We weren’t meant to work all out , every day, without seasonal shifts and pauses.

Pick a time—say, the month of July—to slow down. Don’t volunteer for extra work. Don’t offer Mondays as a possibility for meetings. Take on an easier project for cover.

He also recommends taking yourself out to a monthly movie during the workday. Say it’s a personal appointment, and enjoy the sense of control and creativity it brings.

You don’t have to nail a manifesto to the wall, he adds, or try to change the whole company culture. Instead, quietly carve out change for yourself.

Coming into your power

The catch: You have to be really good at the part of your job that matters. And you have to get big stuff done. Remember, this is about being a happier high performer, not slacking.

“There’s no hiding,” Newport says.

I suspect this terrifies a lot of people. They’ve gotten good at being always on and typing up yet another meeting agenda. Tackling a major project or goal is often harder, and comes without a guarantee that you’re going to nail it.

Scary or not, real work is becoming imperative. AI is coming for the rote parts of our jobs. Leaders are sussing out the “nonsense” projects and roles in their ranks as they cut jobs, Newport says. No boss wants to be left with a team of people who are aces at responding to emails.

Mastering a valuable skill puts you in control. Newport writes of people who leave corporate America behind and move where they want , working remotely as contractors, charging wild fees for fewer hours of work. The more you shed the work that doesn’t matter, and spend that time getting better at the stuff that does, the more leeway you’ll get.

“The marketplace doesn’t care about your personal interest in slowing down,” Newport writes. “If you want more control over your schedule, you need something to offer in return.”

Figure that puzzle out, and you might just be able to have it all—high achievement, and your sanity.

Future Returns: The Banking Crisis Didn’t Scare Off Alternative Investors

We’re thinking about productivity at work all wrong, Cal Newport says. But how do we tell the boss that?

Less is more

Be the one to trust

Bite-size shirking

Coming into your power