Alternative Asset Investing: Aug 2021

Alternative Assets: I Still Haven't Found What I Am Looking For 

Alternative Asset investing has been among the fastest-growing asset classes recently, both as a means of obtaining the higher risk premia required to meet the demanding return requirements of many funds, but also as a way of obtaining non-correlated returns while giving portfolios additional diversification. Low yield, low return markets have prompted investors to seek returns and income away from the traditional asset classes. 

This selection of papers covers a wide spectrum of alternative assets, ranging from infrastructure, through hedge fund strategies and commodities, to cryptocurrency. Each of these offer their distinct potential benefit to portfolios. These papers also touch on the vexatious questions of inflation hedging and alternative sources of income.

Industrial property – Growth outlook justifies pricing (Macquarie AM, Jul 2021)

In this note from Macquarie Infrastructure and Real Assets experts Rod Cornish and David Roberts, they present the case for industrial property, noting the effect of Covid-19 and e-commerce on the sector. Despite recent performance being robust, they believe the outlook more than justifies valuations.

Private Credit – Opportunities across the spectrum (M&G Investments, Jul 2021)

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

M&G Investments provides an overview of private credit markets and considers the prospects for the asset class as countries begin to return to normality. Continuing rollouts of vaccine programmes and an end to lockdowns offers the hope of a return to normality.

Cryptocurrencies and ESG: A contradiction in terms? (Candriam, Jul 2021)

For compliance reasons, this paper is only accessible in the UK & Europe

This comprehensive paper from Candriam looks at the evolution of cryptocurrencies, how ESG concerns have emerged that relate to the way different cryptocurrencies have been structured and programmed to work, and finally debates whether the asset class can ever satisfy mainstream ESG criteria.

Gold Demand Trends Q2 2021 (World Gold Council)

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

The World Gold Council looks at gold investment flows in Q2, which saw increased supply because of reduced Covid-related lockdowns in mining areas. Demand for gold-related investment products and jewellery is forecast to improve as economies continue to recover, whilst central bank demand is expected to remain robust as countries focus on diversification and risk management for their reserves.

Finding the Informational Advantage in Private Equity (BlackRock, Jul 2021)

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

Alternative data – non-traditional data used in the investment process – is changing the way we live, the way we work and now the way we invest. Nowhere is this change anticipated to be more impactful than in some of the most highly sought-after opportunities in private markets, such as late-stage venture capital or growth equity investing.

The Art of Living – A new equilibrium for Europe (M&G Investments, Jul 2021)

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

M&G Investments’ paper explores how commuter and migration patterns may have been altered by the move to a Working From Home (WFH) regime during lockdown, and how the pandemic has made many people reconsider how and where they wish to live, and what features have become essential, for example garden space.

The Investment Case for Net Zero Buildings (LGIM, 2021)

For compliance reasons, this paper is NOT accessible in the United States and Canada

LGIM outlines the role net zero buildings may play in helping to meet the Paris agreement objective of limiting an average global temperate increase to 1.5 degrees.

Private Equity Fund Cashflow Forecasts: A pragmatic approach (SimCorp, 2021)

SimCorp outlines a multi-faceted approach to private equity fund cashflow forecasting, which is becoming increasingly important as interest in this illiquid asset class continues to surge.

Core infrastructure: Inflation hedging and the search for yield (MIRA, 2021)

In this paper, Macquarie Infrastructure and Real Assets argues that core infrastructure investments are a play on real interest rates remaining low. Infrastructure has a good record of providing a decent hedge against inflation, with robust risk-adjusted return performance.

Video: Liquid alts deliver diversification (S&P Dow Jones Indices, Jul 2021)

S&P Dow Jones Indices’ Senior Director Rupert Watts and Associate Director Kelsey Stokes explore liquid alternative investments, highlight the pros and cons of using them, and illustrate how insurers may find them a useful tool to help diversify and protect against risk.

Hedge Fund Solutions: Strategy outlook Q3 2021 (UBS AM)

In their Hedge Fund Strategy Q3 Outlook, UBS AM make some minor adjustments to their current strategy weights. Intentions are to increase exposure to agency mortgage-backed securities, re-evaluate the exposure to APAC risks given recent Chinese regulatory intervention, and focus on those managers benefiting from cyclical sector exposure and a value bias.

Commodity Prices and the Strength of the U.S. Dollar (Parametric, 2021)

Parametric’s paper looks at the inverse relationship between the U.S dollar and most physical commodities. However, additional research suggests that for individual commodities, other factors (such as weather) may play a more significant role in determining price.

Preparing for Energy Transition in Infrastructure (McKinsey & Company, 2021)

This paper from McKinsey & Company focuses on the preparations for the energy transition, featuring changes to electricity grids, infrastructure and process engineering for the oil and gas industries, and decarbonising elements of the construction industry.

Unlisted Infrastructure: Defensive with an inflation hedge (I&W Institute, 2021)

This article compares unlisted infrastructure to various inflation tracking proxies and suggests that the benefits appear to outweigh several of the negative issues.