Since this is the AM forum, I figure I'd post here to see what you all think. Would love advice!
I am really, really fat on exposure to consumer brands. Probably 98% of my net worth right now in private companies in the space and related SaaS.
What should I invest in as a hedge?
I used to have more real estate and healthcare exposure, but that is now very small relative to the consumer portion of things.
Ideas?
I need to be able to buy the exposure in chunks as small as ~$250k - $1m.
Do NOT want tech, as the type of consumer I do seems to correlate pretty hard to tech valuations already.
Based on the most helpful WSO content, it seems like you're looking for ways to diversify your portfolio and hedge against your heavy exposure to consumer brands. Here are a few suggestions:
Hedge Funds: Many hedge funds practice strategies where they take on both long and short positions in the market to mitigate market volatility. This may allow them to increase their "Sharpe ratios" (better returns for less risk). The largest hedge funds such as Citadel, Millennium, and Point72 offer multi-manager strategies that use several different approaches.
Market-Neutral Alternatives: Look for market-neutral assets and funds. These investments aim to achieve a steady return regardless of the direction of the broader market, which can help protect your portfolio during periods of volatility.
Distressed Debt: Investing in distressed debt can be a way to diversify your portfolio. This involves buying the debt of companies that are near or currently going through bankruptcy. The idea is that these companies will be able to turn around their fortunes, and the value of their debt will increase.
Real Estate and Healthcare: You mentioned that you used to have more exposure to these sectors. It might be worth considering increasing your investments in these areas again, as they can offer a good counterbalance to consumer brands.
Cash: Keeping some cash on hand can be a good strategy. Not only does it provide a safe haven during market downturns, but it also allows you to exploit opportunities when they arise.
Remember, it's important to understand your own risk tolerance and investment goals before making any decisions. It might be worth speaking with a financial advisor to help guide your decision-making process.
Sources: https://www.wallstreetoasis.com/forums/the-only-post-about-active-investing-you-will-ever-need-to-read?customgpt=1, How long will the Covid-19 affect the markets? How should everyday investors react?, Distressed Debt Hedge Fund out of College - Prep Advice, Hedging Choices (Experienced Traders), Basic Overview of the Consumer Sector
With 98% in private consumer/tech, you are way too concentrated and illiquid for any type of passive hedge/natural diversification to work out.
The only potential hedge I can see might play out would be buying significantly out of the money puts on small caps, consumer & tech as a direct hedge (given leverage and the fact that these contracts are typically priced super cheap). However, you still have major liquidity risk as 98% of your net worth is stuck in private investments and you still need enough liquidity to service an options hedge strategy.
Other potential avenues might include gold or commodities (negative correlations to recessionary environments & positive correlations to inflation), but those are indirect hedges and may bite you in the future.
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