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As markets continue to see volatility amid changing tariff policy, investors are looking for ways to diversify their portfolios. One way is alternative investing. Joining me now on this, we've got in studio live and living color, Dave Donohue, who is the Franklin Templeton Wealth Management Alternatives Head of America. Great to see you again.

Great to see you, Brad.

So let's dive into this. As we're thinking about some of these alternative investments, there's so many different alts. It could be anything from real estate to private equity to, you know, Pokemon cards, if you wanted to think about it that way, but there's also different levels of liquidity. So let's kind of rank these and perhaps go in order from the most liquid to the most illiquid of what we're seeing in certain alternative investments. Where does one start?

Yeah, it's a great question, Brad. If you think about liquidity, generally speaking, you're talking about the duration. How long I'm going to hold an asset? Private equity, primary private equity would be considered one of the more illiquid components of of private markets. You move into things like private credit, generally speaking the duration of that asset is shorter, and private real estate at some times perhaps even shorter than private credit. So that's how I would think about the liquidity profile, but the vehicle you invest in matters to how frequently an individual investor can or cannot access their liquidity, and that's a key part of the business as well.

Okay. And so which alternative investments from your assessment of the market are the most liquid right now?

So if you think about what's going on in the market, it reminds me of our last conversation. Tariff concerns, concerns of an economic slowdown potentially, uh uh uh a heightened risk of recession. That's introduced volatility to the public markets, but remember, private markets price off fundamentals, not sentiment and volatility. Generally speaking, the vehicles, private equity, private real estate, and private credit that have been built for the individual investor, offer chances at liquidity monthly or quarterly. So we advocate using them, using them in a responsible way because of what they do for your portfolio, potential to enhance returns, decrease volatility, and people are seeing the power of that right now. But it shouldn't be 50, 60, 70% of your allocation. It's a part of your allocation where you can afford to give up liquidity for a period of time to enhance portfolio outcomes.

And so with that in mind, how do investors who are just trying to round out their portfolio a bit more and add some more of that longer term duration on through an alternative investment. How do they begin dipping their toe in perhaps, so to speak, within this type of investment strategy?

It's a great question. A couple ideas. One, work with a trusted professional, work with an advisor. Organizations like ours, and there's many out there that do the same, have built websites that are um direct access for individual investors, no login required, where you can learn about the asset classes and the role that they play in portfolios. At the end of the day though, history would show you that allocating 10, 20, or in some cases maybe more to these asset classes as a percentage base of an overall portfolio can provide real value.

And so with that in mind, as you're thinking about what type of returns you should expect longer term, what what's a good rule of thumb as you're looking at and assessing alternative investments?

Appropriate disclosures out of the way that not everything is created equal and you have to pick the right manager. Generally speaking, if history holds, you should expect a couple hundred basis points, a couple percentage higher return out of the private markets than you do in the public market equivalents. So let's break that down.

Sure.

Private equity, you should expect higher returns than public equity over the long term, and you're seeking growth there. Private real estate, you're seeking growth and income just like you would be in a public read. You should expect a couple hundred basis points full market cycle of higher return. Private credit, you're seeking income, same to bonds, a couple hundred basis points full market cycle of higher return, all with meaningfully less volatility, which helps smooth portfolio outcomes.

What is the difference in upfront capital that's necessary for alternative investments, kind of and I know it's differing, but on aggregate as a compare.

The great news is the industry has really evolved. So a decade ago, historically, the only folks that could allocate to alternatives were the ultra wealthy or institutional investors. Right. As an industry, we've created these vehicles that are referred to as semi-liquid or perpetual vehicles. And in addition to letting money in and out more frequently, they they're made available to a broader accreditation of client. You have to have a lower net worth to invest, and you can invest at a lower minimum. So these tools are really becoming democratized, more available to the broad investor base, which is a good thing if you think about the outcomes folks are trying to achieve with their portfolios.

Dave, great to see you. Thanks for joining us in studio.

Thanks for having me, Brad.