A term that is probably overdue for reclassification is “alternatives.” It relates to anything other than listed equities, bonds and cash. Considering the oft-reported point that areas such as private markets are becoming more important, maybe it is equities that are “alternative” these days?
In any event, the search for new, hopefully uncorrelated revenue streams is a sort of “Holy Grail” for asset allocators/risk managers. It turns out that areas such as forms of real estate, aircraft leasing, “permanent crops” and manufactured housing are part of a potential mix. They certainly appeal to Tom Bratkovich, chief investment officer at , where he was responsible for business development, new product launches, and deal sourcing for a $30 billion AuM fund-of-funds platform. Prior to this, he worked at Longview Investment Partners and LP Capital Advisors, advising large institutional investors. Additionally, he was an early-stage venture capital investor.
Tax plays a role, he said.
“A defining feature of this shift is a more intentional, tax-advantaged approach. Clients are actively using established programs and structures, such as 1031 exchanges, Opportunity Zones, QSBS, and bonus depreciation, to generate what we think of as 'tax alpha,’ materially improving after-tax outcomes without increasing underlying asset risk,” Bratkovich said.
“From a risk perspective, portfolios are becoming more customized and purpose-built. Rather than pulling back wholesale, families are reallocating risk by reducing reliance on public market volatility and reallocating toward private credit for income and capital preservation, real assets for inflation protection, and select private equity opportunities where secular tailwinds are strongest,” he said.
FWR asked Bratkovich about the case for aircraft leasing.
“Aircraft leasing sits at the intersection of essential infrastructure and contracted cash flow. Global airlines increasingly prefer leasing over ownership to preserve balance sheet flexibility, which creates durable demand across market cycles. For investors, leases are typically long-dated, dollar-denominated, and backed by mission-critical assets with global liquidity,” he replied. “From a portfolio construction standpoint, aircraft leasing provides exposure to transportation infrastructure with limited correlation to traditional real estate or corporate credit, while offering institutional-quality counterparties and predictable income streams.”
Bratkovich said tax considerations must be considered.
“Aircraft leasing can be structured to generate meaningful tax shields through bonus depreciation and cost recovery. When paired with stable lease income, this allows a higher proportion of return to be delivered on an after-tax basis, particularly for investors seeking current income without fully taxable yield,” he said.
There are risks, such as what Bratkovich called “residual value risk.”
“Changes in aircraft technology, fuel efficiency, or regulatory standards can impact long-term asset values,” he said. “Airline balance sheets can be cyclical, requiring disciplined underwriting and diversification by carrier, geography, and aircraft type.”
There are also liquidity and remarketing risks. Although aircraft are globally traded assets, re-leasing or selling during industry dislocations can take time. Geopolitics and regulations cannot be ignored, either. “Cross-border leasing introduces jurisdictional and enforcement considerations,” he said.
Made in a factory
The conversation turned to what is known as “manufactured housing.” According to Investopedia, “Manufactured housing (MH) is a home unit constructed primarily or entirely off-site at factories prior to being moved to a piece of property where it is set.”
Bratkovich said that MH is “one of the most durable segments within residential real assets.”
“From an investment perspective, mobile home parks benefit from fragmented ownership, operational inefficiencies, and strong demographic tailwinds, creating opportunities for both stable income and long-term value creation,” he said. Such housing tends to be one of the more tax-efficient types of real asset. For some investors, for example, they can structure the assets to benefit from bonus depreciation, cost segregation, and ordinary expense deductibility, which can meaningfully reduce taxable income relative to cash flow.
On the risk side, however, there are challenges such as regulatory and political risk: Rent control, zoning restrictions, and local policy shifts can affect operating flexibility and revenue growth. Owners must also consider reputational risks when it comes to managing homes in a particular community and remember that property must be upgraded to comply with local ordinances.
Crops that last
Last but not least, there’s the case for “agricultural permanent crops” such as almonds, olives, pistachios, or citrus.
“These provide exposure to food demand, water-constrained supply, and land appreciation. Returns are driven by biological growth, commodity pricing, and operational efficiency rather than financial engineering,” he said.
Orchards, development costs and operating costs can defer taxable income, particularly in the early years. On the risk side, availability of water and local regulations can be problematical (farmers in California, for example, regularly have issues around water irrigation supply). Commodities can fluctuate, and owners must not forget the vagaries of weather, pests and even geopolitics.
Almond tree
(This news service recently spoke to Bratkovich about views on private market investing more generally and where it should fit in the asset allocation picture.)