High income investors rethinking their portfolios: Survey

A new survey from Cadre shows that investors with $150,00 or more invested in their stock portfolios are seeking new investment ideas after taking losses the last couple of years. Cadre Founder and CEO Ryan Williams explains his company's findings.

Video transcript

- A recent survey from Cadre found that 80% of investors who had $150,000 invested in stocks found their portfolio's hit hard by recent economic headwinds. Nearly 8 in 10 American investors are now considering new options to protect their investments in the future, according to Cadre. Well, joining us now is Cadre founder, executive chairman, and CEO Ryan Williams, to help us break this all down.

Thank you for joining us this morning. So I first want to look at some of these losses that these people who had $150,000 invested here. When you compare that to what we saw with those who had less invested and the higher invested, why was this group so particularly hard hit over the last two years?

RYAN WILLIAMS: Yeah, thank you for having me. I believe what's happened is that there's been an overexposure in index to equities. We saw in our surveys that those who actually had investments in real estate-- roughly 62% or so-- are actually confident in maintaining that portion of their investment strategy, but the rest of their portfolio they're concerned about.

They're worried about the equity market's volatility. They're worried about inflation. And many are worried as well about the banking sector and the knock-on impacts that the volatility there will have. But what we've seen is that real estate, especially sectors like multifamily, industrial, student housing, are actually outperforming. And many of those that we surveyed had exposure to those very sectors.

- And so then you mentioned inflation there in terms of where that ranked about-- in terms of what people were most concerned about in investing in that space. What are some of the other factors that were also at play?

RYAN WILLIAMS: You know, we also saw that folks were very focused on yield and income and earning cash flow right away, and you know, that goes hand in hand with inflation and the cost of goods being as high as they are. We also saw that a lot of people were focused on tax benefits or incentives.

Many people are focused on having to work longer as a result of, you know, some of the challenges in the jobs market and the relative inflationary cost. And so those-- those issues and concerns all wrapped up together have really created a dynamic where we've seen people trying to get more specialized in what they invest in. And again, we think that specialization is one of the best ways actually to play real estate in inflationary hedge today.

- So for people who are looking at some of these alternative investments-- I mean, we saw things that people had the most confidence in. I mean, those included commercial real estate, crypto as well. But in terms of how they should approach this, what should you ask yourself when you're looking at some of these alternate investments to make sure that you're not just going after something cheap but something that's also going to grow for you?

RYAN WILLIAMS: Great question. First thing I always tell people about is it's really about the management team. It's really about those who are operating in whatever the space or sector is. You know, real estate, just like equities, has a direct correlation in terms of outperformance with great management. Great management can always generate output even in a challenging market. And so I'd say having a great manager, a great sponsor, a great operating team is first and foremost what I would consider most important.

And then I think that it's important now to be contrarian. We know that from the great financial crisis a ton of wealth was built predominantly with institutions whereas we're focused on bringing institutions and individuals together. But a ton of wealth was built amongst the stress and dislocations that were happening. And this go around, there are going to be opportunities.

Regional banks are pulling back. And as a result, there will be a need for liquidity. There will need for someone to step in and help great assets generate output. So we believe that being flexible, playing credit are two ways to benefit from some of the dislocation. As Warren Buffett said, you know, it's critical. You have to be fearful when others are greedy and greedy when others are fearful. And this is that time and that window when investors can actually see outperformance.

- And that really can vary depending on, say, how close you are to retirement. So then in terms of the timelines-- the differences that you saw in the timelines as people focused on them, when you think of the volatility now versus, say, trying to take a longer look at some point when the Fed does pause or start cutting interest rates, how did those-- how did those differ?

RYAN WILLIAMS: Yeah, it was really interesting just to see the-- the reconsideration from a lot of individuals about how long they're going to need to work in order to generate a stable income and have an income for the rest of their lives. We saw that people were really extending out their time frames for retirement. People were looking at three, four, five years plus relative to what they thought just two years ago.

And so what's been fascinating is that, with that duration, there needs to be investment opportunities that provide you with upside that matches that duration. Again, real assets and other alternatives actually over the long run can drive outperformance relative to equities, and so we're seeing more people trying to get creative and think outside the box so that they can generate returns that they didn't necessarily think they would have to just two years ago as a result of the actions from the Fed and the inflationary environment we find ourselves in now.

- People certainly have a lot of options as we were showing there. A big thank you to Cadre founder, executive chairman, and CEO Ryan Williams for joining us this morning. Thank you so much. All right, coming up, the hero of the summer.