LGT Capital Partners is seeing rising interest in endowment-style investing from Asia’s wealth management sector, citing its liquidity management and over 50% exposure to private markets from day one as a way to capture long-term opportunities.

Historically, investors relied on the 60/40 model, assuming fixed income would provide a hedge. But 2022 proved there was nowhere to hide as traditional asset classes became highly correlated.

“That was an inflection point where a lot of wealthy clients started to look at other sources of diversifying alternatives which is why an endowment-style portfolio that historically has had that focus started to gain more traction and interest,” said Antonio Ferrer, partner and global head multi-asset portfolio management  at LGT Capital Partners.

The firm’s endowment-style Princely Strategy is distributed exclusively through LGT Private Banking to private clients and family offices. Commissioned in 1998 by the Princely House of Liechtenstein, the strategy began with a US$1 billion commitment and has grown into a US$24 billion global mandate.

Ferrer said LGT invests alongside clients with its own capital. More than US$1 billion is invested in the Princely Strategy for the Princely Family and LGT employees. 

“Whatever decision we make for our own principal capital is reflected the same way for every investor that is co-investing into this very same endowment strategy, and I think that matters, especially in volatile markets, because it reinforces the long-term mindset,” he told Asian Private Banker.

This alignment allows the firm to be selective. “If a market or asset class becomes too crowded and pricing doesn’t make any longer sense to us, we can wait,” Ferrer said.

The same platform and principles are also used to build customised endowment-style portfolios for family offices and other partners while maintaining a long-term, diversified, multi-asset framework.

Managing liquidity

A key part of LGT’s strategy is matching the portfolio’s liquidity with the terms offered to co-investing clients. Liquidity has become a major concern for private wealth investors, especially amid headlines about redemptions in private credit evergreen funds. While some investors have withdrawn shares over the years, the firm has never had to gate or suspend the strategy.

“The work that we put into the strategy in assessing what is the right liquidity framework was tested multiple times with real crises […] In our case, it’s not about finding only evergreen portfolios out there that would provide us with liquidity, but really structuring our portfolio in a way with proper vintage diversification,” Ferrer said, adding that the firm also uses secondary markets, stepping in as a liquidity provider when attractive assets arise.

Client education is equally important. Unlike a high-frequency vehicle like an ETF, the strategy is not a daily liquidity play; it requires a partnership with investors who understand that true alternative returns are generated through patience, not daily trading.

Over 50% alts exposure

The firm’s endowment-style strategy combines private and public market exposure, maintaining a structural tilt toward alternatives with over 50% allocation, including more than 20% in private equity.

This high weighting is a foundational component rather than a tactical reaction to current public market volatility, according to Ferrer.

“In private markets, if you can take the longer-term view, your opportunity set is also much bigger because there’s more and more companies these days that remain private for longer. Otherwise you would just limit yourself in being active in the public equity market space which in recent years has been fairly concentrated in terms of return generations,” he explained.

While the liquidity crunch has expanded secondary opportunities, primaries remain a focus. “We remain very active in primaries, particularly in the small and mid-market space, which has been our core focus since inception. We continue to like this part of the market because it’s a very large, fragmented opportunity set. There’s lower competition, more attractive entry valuations, and still significant room for value creation,” he said.

Ferrer views inflation as a primary risk and said the firm is leaning more heavily into private infrastructure. In the traditional liquid space, he noted, inflation-linked bonds have become more attractive than they used to be.

LGT Capital Partners has also found better risk-adjusted opportunities in European direct lending versus the U.S. large-cap segment. “Europe generally offers a more robust credit environment […] which provides better diversification and downside mitigation for the more uncertain market environment,” he said.