This acclaimed wealth manager doesn't see an imminent recession, but is making one surprising investment choice just in case
- Brian Pfeifler of Morgan Stanley Private Wealth Management has been one of the top ranked US wealth managers for years, and he says investors shouldn't be too fearful of recessions.
- He says downturns are inevitable, and they can create opportunities for the best companies to grow.
- Pfeifler says it's going to be hard to find areas that can provide the big returns investors have grown accustomed to over the decadelong bull market, but told Business Insider about the areas he's targeting.
- Visit Business Insider's homepage for more stories.
Fear of another crippling recession has stalked this bull market for almost its entire 10-year run, but one of the top wealth advisers in the country says there's not that much cause for concern.
Brian Pfeifler, managing director and wealth advisor for Morgan Stanley Private Wealth Management, manages $11.9 billion for the very wealthy. He's been a fixture near the top of Forbes' wealth rankings in the US in recent years, including a No. 2 finish in 2018. He says investors shouldn't panic at the thought of a downturn.
"Clients have been worried about a recession for three or four years and one hasn't come," he told Business Insider in a phone interview.
He doesn't expect one in 2019, and said the long-predicted recession might not come next year, either.
Whenever it comes, he's not planning big changes in his investing approach, and he says investors should focus on the positive: During that recession, some companies will thrive or plant the seeds of future success.
"When they have competitors that are less financially sound, or with fewer resources ... these companies (can) increase market share, or buy companies at cheaper levels on an acquisition strategy that they wouldn't get if we weren't in a recession," Pfeifler said.
That makes recessions a real opportunity for those companies. He says that investors who make stay patient and don't sell at a loss are likely to benefit, so they shouldn't abandon a stock just because a recession drives down its price.
For the same reason, he advises clients to keep enough cash in their portfolios to make sure they don't have to sell anything just to meet their spending or investment needs.
"You should expect there will be 10% corrections twice a year," he said, an approach that reduces the pain those inevitable downturns are going to cause.
The S&P 500 closed at an all-time high Tuesday, marking a full recovery from its meltdown in December, and Pfeifler said the 10-year rally has made it difficult to find big opportunities. He expects years of weak returns from bonds and cash, and while he thinks stocks will fare better, he's not sure they will reach the levels of recent years.
So he's juicing those returns with an option that's only available to very wealthy people like his clients: Private equity investments in smaller companies. He explains that many of the companies in this niche market aren't large enough to issue debt on public markets. To attract investors, they have to offer outsize returns.
"Private equity managers that we've been investing with for many years have extraordinary track records," he said. "They hopefully will be able to deliver more in the line of low to mid teen returns on a conservative basis."
That's a good deal more than he's expecting from the stock or bond market. He's also investing in distressed debt, saying that it also offers greater returns.