The following is an adaptation and more elaborate version of the interview with Giulia Bacelle, Branded content editor & Project manager at WeWealth, the most important Fintech in the wealth management field in Italy

With a new world (and new finance) emerging from persistent inflation and a prevailing recession, some argue that the 60/40 portfolio rule, a simple investment strategy that allocates 60 per cent of your holdings to stocks and 40 per cent to bonds, has finally reached retirement age.

In its place, a new 'modern' portfolio finds its way, in which 30% is allocated to alternative investments. Among these are collectable goods, including watches, vintage cars, wines, and spirits, far more than mere "passions" when considered investment goods. We spoke with Ioana Surdu-Bob, co-founder of Konvi, the first pan-European crowd-investment platform that allows small investors to own fractions of alternative assets such as watches.

The market well acknowledges the concept of asset diversification. However, while it is nowadays pretty simple to acquire bonds or equity, how can one safely integrate alternative assets?

In the last few years, investors have been searching for methods to build different alternative asset allocations by themselves, moving forward from the traditional 60% equity and 40% bonds. In addition, investment guidelines are evolving with the markets within the context of high inflation, slow economic growth, geopolitical turmoils, and a less globalized world.

For instance, research by the New York-based private equity firm KKR has shown how a modern portfolio consisting of 40% equity, 30% bonds, and 30% alternative investments enhances returns and reduces volatility in contexts of high inflation.

However, it has to be noted that large upfront capital is usually required to build a portfolio that allocates this much into alternative assets. As alternative assets are all non-traditional investments, many asset classes fit in the alternative bucket, such as startup investments, private equity, private debt, real estate, or exotic assets/collectables - which is the main focus of Konvi.

For example, let's say you want to allocate 30% of your portfolio worth €100,000 into alternative assets. This means that you would be able to allocate €30,000 into alternative investments such as purchasing equity in a start-up or maybe buying a luxury watch. While this amount would have allowed you to spread the capital into different ETFs, with alternative assets it has not been as easy in the past as it requires a lot of upfront capital.

Through Konvi however, investors can acquire a share in luxury watches, rare whisky casks, blue-chip art or even pre-historic fossils starting from only €250.

What’s the model Konvi proposes in this context? What are the benefits compared to the direct purchases of alternative assets?

Access to investment-grade assets requires well-established industry connections, not only to acquire them in the first place but also to purchase something that bears low risk. If you do not have deep knowledge about the asset class you are investing in, there is a high risk of choosing the wrong asset (or, even worse, fake). Investing in Konvi has three benefits: diversification, increased safety, and access.

The low entry barrier helps customers spread their investments across multiple projects, allowing them to reduce downside risk and also help participate in investment opportunities that they find personally appealing or have a connection to.

Also, many alternative assets come with struggles such as storage, maintenance, and finding a suitable buyer when it's time to sell the asset. Konvi lifts these headaches by connecting retail investors with world-leading suppliers and asset managers.

Here is a quick explanation of how it works:

A great example of a watch purchased by the Konvi community is the RRP $500,000 Cartier Extra Large Tortue High Complication Platinum, of which only 15 exist in the world, or a Banksy art piece curated by our partner TGB Contemporary

What are the recommended holding periods for assets listed on Konvi?

The assets funded on Konvi typically have a predetermined holding period of between 3 to 5 years. Of course, as a customer, you may choose the length based on your personal financial goals. However, it is guaranteed that the holding period for each project is ideal, as the supplier always chooses the assets that best fits the predetermined holding period of the investment project. Remember, some asset classes that are inherently more liquid, like gemstones, may be held for shorter periods, while assets like art or whisky may require 5-10-year holding periods.

Art and other collectables are usually known to be illiquid investments; hence, they are not considered to be easily converted into cash at the current fair market price. However, with respect to “traditional” investing, much of the attention is given to long-term opportunities that recommend a holding period of 5-10 years (e.g. sustainability). How does the market respond to alternative assets in this context?

It is recommended that exotic assets be held for more extended periods spanning multiple years as the rarity and exclusivity of tangible assets will increase over time. Think about wine vintages for example. While a certain vintage might already show high investment potential in the early years after being bottled as demand is high, the longer you hold it the fewer bottles will be in the open market, which drives the increase in price. Therefore, most investors who are serious about exotic investments prefer long-term investing to maximising their returns. While the reasons may differ, many investors invest for the long term for retirement or kids' education. Such investors build a diversified portfolio, including stocks, bonds, and alternative investments (including exotic assets). While it is possible to invest in alternative assets for the short term, exiting through secondary markets may be risky as such investments are not widely traded. Therefore, it is generally preferred to consider the asset locked for a set period, and of course, if an early exit opportunity arises, take advantage of it.

You come from a background of traditional investing. Why do you personally go into alternative ones besides passion?

I've always invested in alternative investments from an analytical rather than a passion perspective. Besides traditional investments such as ETFs, I added various alternative investments to my portfolio. I invested in real estate due to the appreciation potential and low interest rates at the time. I invested in peer-to-peer loans to yield profits regularly. At the same time, I dollar-cost-average a tiny amount with Ethereum to avoid losing the potential opportunity within the crypto space. I sought exotic assets such as watches and handbags but did not have access to them due to the high cost of these items.

In this context, my co-founder and I saw the vast opportunity to make fractional investments possible within the exotic assets space and set ourselves to build a European-wide solution. The benefits were apparent to us: tangible assets are an inflation hedge because their prices go up with inflation; secondly, they present a low correlation to traditional investments offering a great diversification tool; and lastly, they offer higher average historical returns than traditional investments.

This has led us to work hard to bring awareness and educate individuals about portfolio allocation and wealth building. An important step here was the launch of Discover, our in-app community where our 50,000+ users can discuss investment strategies and news in the world of alternative assets, and reach out to others for questions - Join us for free!

Note: this article only engages the opinion of its author and does not constitute financial advice.

About the original author

Giulia Bacelle is a Branded content editor & Project manager at WeWealth, the most important Fintech in the wealth management field in Italy. It’s a fast-growing business based in Milan, created by asset managers and digital experts in financial markets. The original article is available at the following link.