Investment Perspectives

The Future’s Not What It Used to Be

Thomas K. Hoops, President & Chief Operating Officer, New Republic Partners 

Designing and implementing an investment solution to some degree requires a view of the future. The challenge, of course, is that the future is unknowable.

Some investors try to predict short-term market moves and actively trade on the barrage of daily news. Good luck to them, but that is not our approach.

As long-term investors and capital allocators, we do not engage in short-term prognostication. However, we do need to interpret longer-term trends and connect them to the current environment and client objectives. And while always uncertain, there are some things we do know about the future, and they all point to an increasingly challenging environment for investors of all types.

What do we know?
Demographics. Particularly in the developed world, demographic trends point to an increasingly aging population. This necessarily lowers overall economic productivity and is a headwind to GDP growth. Increasing costs of health care and underfunded retirement systems exacerbate the situation.

Interest Rates. Since hitting a peak in 1981, interest rates have been in a near-constant march lower. That is 40 years of tailwinds to fixed income markets providing investors outsized returns and providing portfolios both income and diversification. With rates now at near-zero levels and likely staying there for a while, it puts in doubt whether traditional

fixed income will continue to provide investors the same levels of income and diversification.

Valuations. Fueled by central bank liquidity and low interest rates, stock market valuations in the U.S. are near all-time highs – and neither of these conditions are likely to change for some time. While current valuation levels may tell us little about near-term returns, it is empirically true that they tell us a lot about long-term returns. Today’s high prices likely will result in lower average returns for the U.S. stock market over the next
10 years.

Client Needs. While traditional sources of growth and income may underwhelm going forward, the needs and objectives of clients remain unchanged. Charitable organizations still need to generate meaningful returns to fund grants, scholarships, and operating costs. Successful families and individuals continue to have financial aspirations for themselves and future generations. Add to this the realities of most municipalities, states, and the federal government, and it is likely that tax burdens will rise materially.

What do we do now?
Given what we know, it is clear to us that what has worked very well for investors the last 40 years may not work as well for the next 40.

Based on the changed economic and financial landscape, to continue to meet client objectives, investment portfolios need to look different than they have in the past. Specifically, they need to be more globally diverse, have increased exposure to private markets, seek less correlated sources of income and growth, and be vigilant around fees and taxes.

This is not really a big secret…large institutional investors and sophisticated family offices have known this for years and have been building portfolios accordingly.

Unfortunately, outside of this rarified group most high-net-worth clients are still receiving traditional, home market-biased investment solutions with little to no access or allocation to many of the additional sources of return available in global, private, and other alternative asset classes. And despite deserving better, they are likely paying too much for what they ultimately receive.

The demands of pulling together a tailored solution of global investments that span the public and private markets requires resources, experience and access. That requirement equates to needing financial scale most investors and their advisors lack. While many of these investment opportunities offer the potential for higher or differentiated returns, there is a significant performance dispersion among investment managers. Access to the best requires meaningful, scaled relationships.

When today’s high-net-worth clients are given access to private market or alternative strategies, it is often through a packaged product that all too often can be opaque, contains extra layers of fees, possesses conflicts, and lacks the types of investment opportunities still reserved for the largest investors.

The historical structure of the investment management market makes it hard to see how this will change, at least any time soon.

Time for a New Approach
New Republic Partners is designed to serve the holistic financial needs of our clients with a new approach that recognizes these investor challenges broadly, while being responsive to unique client objectives.

Our approach brings clients the scale, access, and experience of a multi-family office through a partnership approach…investing with and alongside our founding families, the investment team, the firm leadership and other successful clients.

Through a commitment to transparency, reasonable pricing, and re-defining the client experience, we extend and deliver investment solutions and opportunities typically available only to the largest investors. We are proud to offer unique, institutional quality investment solutions provided by partners who are literally invested in each client’s success.

Thomas K. Hoops is president and chief operating officer of New Republic Partners, an investment management and wealth advisory firm. Hoops brings insights and experience from a 35-year career in global asset management and fresh perspectives on the new dynamics of financial markets.

Reach him at

About New Republic Partners
New Republic Partners is an innovative investment management and wealth advisory firm serving affluent families, RIAs, endowments and foundations. We believe that clients benefit from access to investment opportunities usually reserved for large institutional investors and the expertise and experience of a successful and seasoned investment management, wealth advisory and family office solutions team. The firm is headquartered in Charlotte, North Carolina, and serves clients across the U.S. with regional offices. More information can be found at New Republic Partners.

New Republic Partners is an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about New Republic Partners’ advisory services can be found in its Form ADV Part 2 and/or Form CRS, which are available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.

The opinions expressed are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed.

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The MSCI ACWI NR Index is a global equity index that captures large and mid-cap representation across 23 developed markets and 27 emerging markets. The index covers approximately 85% of the global investable equity opportunity set.

The Bloomberg Barclays U.S. Aggregate Bond Index is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. The Index is frequently used as a stand-in for measuring the performance of the U.S. bond market. In addition to investment grade corporate debt, the Index tracks government debt, mortgage-backed securities (MBS) and asset-backed securities (ABS) to simulate the universe of investable bonds that meet certain criteria. In order to be included in the Index, bonds must be of investment grade or higher, have an outstanding par value of at least $100 million and have at least one year until maturity.

The volatility (beta) of an account may be greater or less than its respective benchmark. It is not possible to invest directly in an index. Past performance is not indicative of future results.