Growth in appetite for alternative assets

Nov 27, 2018 Blog  Alternative assets , high net worth investors

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In an article recently published in Peer2Peer Finance News, it was stated that “a quarter of high net worth (HNW) investors are now allocating at least one-fifth of their wealth into alternative assets such as peer-to-peer lending (marketplace lending)”, according to new research.

Specialist investment firm Connection Capital commissioned a survey to 120 of their private investor clients and, according to their managing partner Claire Madden, they found that “alternative assets are no longer a sideshow”.

“Given the current challenging investment environment for traditional asset classes, a move towards higher allocations to alternatives is understandable for sophisticated private investors with the right risk profile.”

“20 per cent in alternatives might sound like quite a chunk, but there is the possibility for tremendous diversification within the spectrum of alternatives.

“Alternatives is a broad category containing many different sub-sets of assets and investment strategies”.

“Investors will therefore want to branch out into several types of alternatives where possible, so they can create a variety of returns streams while avoiding excessive concentrations of risk building up in any one area.”

The survey found that investors are seeking access to a range of sophisticated alternative strategies in order to improve their overall risk-adjusted returns.  25% or the survey respondents have a fifth or more of their portfolio allocated to alternative assets, including private equity, commercial property and hedge funds.  Even though these strategies are often less liquid, a long-term approach can enable investors to hedge against more volatile shorter-term investments.

Madden said: “Incorporating assets with different time frames is one way to achieve greater diversification, such as including private equity or property which tend to have a longer-term investment horizon alongside more liquid, but also more volatile, quoted equities.”

For the full article, click here.

Image: Smile Precision via Flickr (CC 2.0resized)

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