Allocating to Alternatives: the best recent papers

Top Recent Papers on Allocating Assets to Alternative Investments

What do commercial real estate investments, toll roads, data centers, commodities, and hedge funds have in common?  They can all be classified as alternative assets.  The field is quite broad, and technically consists of everything that falls outside the realm of traditional investments such as stocks, bonds, and cash equivalents.

The below list of papers deals with issues particular to alternative assets, from implementation and portfolio management concerns, to strategic allocation decisions and outlooks for several of the alternative sub-asset classes.

FEATURED PAPERS

Reducing the cost and complexity of supporting alternatives (SimCorp, 2019)

Institutional, multi-asset investors that utilise alternatives often must navigate issues with transparency, costs, and achieving the right risk/return balance. SimCorp illustrates several problems with a 'traditional' approach to alternatives management and what can be done to combat these concerns.

Real Assets & Portfolio Construction for Institutional Investors (PGIM Institutional Advisory & Solutions, 2019)

In this 29-page paper, the authors conduct a quantitative study, the findings of which support a diversified approach to investment in real assets. They then go on to describe three ways that pension plans could potentially allocate to the real asset sector.

COMMERCIAL PROPERTY

Invesco Real Estate House View: European Market Outlook (June 2019)

For compliance reasons, this paper is only accessible in certain geographies

This 27-page report by Invesco provides a detailed analysis of the outlook for the European real estate market.

Structural Megatrends in Real Estate: Engaging the Future (Nuveen, Jun 2019)

This report is a collaborative effort between Nuveen Real Estate and MIPIM. It includes thoughts on the main drivers of structural changes that the authors believe are most relevant in shaping the future of real estate.

Is this the right time for REITs? (Wellington Management blog, Jun 2019)

Wellington Management describes the strategic and tactical cases for allocating to REITs, given today's economic and market environment.

INFRASTRUCTURE

Infrastructure investing in the digital age (Manulife AM, Jun 2019)

For compliance reasons, this paper is only accessible in the EMEA region

The authors encourage a rigorous approach to the selection and underwriting of infrastructure transactions, as well as being open to new types of infrastructure assets, such as cell towers, data centers, antennas, fiber optics, and crematories.

Practical considerations for listed infrastructure (FTSE Russell, 2019)

Proponents of infrastructure assets purport that they offer steady income streams, higher dividend yields, positive risk-adjusted returns, and downside risk protection. FTSE Russell examines these claims for listed infrastructure.

Infrastructure: Tulips Disguised as Toll Roads (Mellon Capital, 2019)

Publicly listed infrastructure opportunities could provide advantages over investments in the private infrastructure market. The authors explain why this is the case in the context of the present infrastructure spending boom.

PRIVATE EQUITY

Diversification Study: Trend Towards More Concentrated Primary Portfolios (Pantheon, July 2019)

Pantheon revisits and updates an earlier study on PE fund diversification, with fresh data on fund performance and further insight into the identification of the optimal number of PE funds for a primary portfolio.

Direct and Secondary Investing: The Best of Both Worlds? (DWS AM blog, June 2019)

For compliance reasons, this paper is only accessible in the United Kingdom

DWS Asset Management describes how a tactical strategy of 'stock picking' late stage investments from other PE portfolios offers similar advantages to a mix of direct and secondary PE investments.

Investing Late in the Cycle - With a Focus on Private Equity (QIC, May 2019)

Simply relying on leverage and the illiquidity premium is no longer enough to guarantee success for modern PE managers, who instead must increasingly rely on their operational expertise in this late-cycle environment.

OTHER ALTERNATIVES

Hedge Fund Strategy Outlook, June 2019 (Franklin Templeton)

For compliance reasons, this paper is only accessible in the EMEA region

This report by Franklin Templeton takes a deep look at the state and outlook of the hedge fund industry. A changing rate environment, broad macroeconomic risks, and a dramatic repricing of volatility should create opportunities.

Timberland and Farmland within a Mixed Asset Portfolio (Manulife AM, 2019)

For compliance reasons, this paper is only accessible in the EMEA region

This article by Manulife Asset Management compares a farmland and timberland portfolio's risk and return profile to that of CRE and other financial assets.

The Role of Commodities During Periods of Unexpected Inflation (Parametric, 2018)

Parametric looks at commodity returns in previous inflationary periods, finding that in the case of unexpected inflation, commodities may fare better than other asset classes at weathering the storm, due to higher forward prices.

REAL ASSETS

Real Assets Outlook (Verus Investments, May 2019)

Verus Investments describes the outlook for the real assets sector, given current inflation data, inflation expectations, global monetary policy, and the present market cycle.

Building a Real Asset Portfolio (Mercer, 2019)

Mercer describes how investors can build a portfolio of real assets, focusing on opportunities within infrastructure, real estate, and natural resources.