NEW YORK — Amid growing consensus that the Federal Reserve may maintain elevated interest rates for longer than previously expected, asset managers are re-evaluating traditional portfolio structures. GF Star Group, a Texas-based financial advisory firm serving institutional and high-net-worth clients, has released new strategic guidance increasing its recommended exposure to alternative assets.
In a mid-quarter update sent to clients this week, the firm noted that the persistence of inflationary pressures and recent Fed communications suggest the era of near-zero rates is unlikely to return soon. This environment, according to GF Star Group, diminishes the defensive utility of traditional fixed income instruments and calls for a broader toolkit of income-generating and inflation-resistant strategies.
“Investors need to rethink duration risk,” said the firm’s Chief Portfolio Strategist in the report. “If the cost of capital remains structurally higher, traditional bond-heavy portfolios will underperform, both on a real return basis and in liquidity terms.”
Alternatives to Play a Central Role
The firm’s updated allocation framework calls for a notable increase in exposure to private credit, infrastructure equity, and real asset–linked funds, particularly for clients seeking mid- to long-term stability in volatile macro cycles.
According to GF Star Group’s client data, institutional portfolios with over $50 million in AUM have already begun shifting capital into non-public asset classes, with private credit emerging as the most favored vehicle in the current environment. Customized structures, including short-duration direct lending and floating-rate credit, are being used to mitigate rate sensitivity.
“Private markets are no longer peripheral—they’re essential in the current macro regime,” the report stated. “The liquidity trade-off is justified by higher yield potential and better alignment with long-term liabilities.”
Inflation Hedging Beyond Commodities
While some investors have turned to gold and energy commodities as inflation hedges, GF Star Group argues that strategic exposure to infrastructure and real estate with contractual cash flows provides more durable protection.
The firm highlighted sectors such as renewable utilities, digital infrastructure (data centers and fiber), and logistics real estate as areas with inflation-linked pricing power and sustained demand growth.
“Inflation protection doesn’t have to mean volatility. Infrastructure equity can offer both defensive yield and capital resilience,” the report noted.
Implications for Private Clients
For high-net-worth individuals, GF Star Group is recommending rebalancing strategies that reduce duration-heavy bond holdings in favor of diversified alternatives with controlled liquidity windows.
A newly launched client segment model includes optional allocations to secondary private equity, income-producing REITs, and multi-asset hedge strategies designed to navigate prolonged policy tightening.
“This isn’t about chasing alpha—it’s about insulating portfolios from the structural erosion of real returns,” the firm emphasized.
As market participants brace for a longer cycle of tighter financial conditions, GF Star Group’s latest strategy underscores a broader shift underway across asset management: in a world of sustained high rates, alternative assets are becoming the new core.
