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Finding Yield-O: The Search for Alternative Income

  • Posted by: ,  Chief Executive
  • 03 September 2018
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Have you seen my yield?

What lengths will institutional investors go to in order to source alternative streams of income? Infrastructure debt? Real estate finance? Private credit opportunities?

Pricoa Capital presents a primer on the mezzanine financing market, Willis Towers Watson recommends real assets, and other papers discuss the illiquidity premium in detail.

clownfish alternative income

Alternative Income Study 2018 (Aviva Investors, 2018)
(For compliance reasons, this paper is only accessible in the EMEA region)
This Aviva study surveys pension schemes and insurance investors across the UK and Europe, finding that many institutional investors are increasing allocations to sources of alternative income. 

In a Low Yield Environment, What's the Alternative to Traditional Fixed Income Assets? (Zurich Insurance)
We describe alternatives to traditional fixed income assets for liability-driven investors such as insurance companies and pension funds by utilizing their comparative advantage in investing in less liquid assets.

Buyer Beware: Bank Loans Are Not What They Seem (AB, Aug 2018)
(For compliance reasons, this paper is only accessible in North America and South America)
Now may not be the time to invest heavily in bank loans, as credit assets are historically expensive, many loans may be of lower credit quality, and the US is likely in the latter stages of the credit cycle. 

Broadening the universe: The strategic case for alternative credit (LGIM, Aug 2018)
(For compliance reasons, this paper is not accessible in the U.S. and Canada)
Due to late-cycle behaviour in the U.S., should pension schemes reconsider allocations to high yield and emerging market debt?

Cash-flow generating real assets - the next big thing for pension schemes? (Willis Towers Watson, 2017)
Due to low yields in traditional assets, alternative sources of inflation-linked income are needed. Willis Towers Watson suggests that pension funds look towards real assets to strengthen their cash flows.

Alternative Credit Strategies: A Diversifying Complement to Traditional Fixed Income Portfolios (Franklin Templeton)
(For compliance reasons, this paper is only accessible in the EMEA region)
Fixed income has historically been considered a 'safe haven' investment and a source of diversification away from risky assets. But how can alternative credit income sources complement traditional fixed income?

Revisiting the Role of Alternatives in Asset Allocation (PGIM, 2016)
(For compliance reasons, this paper is only accessible in the United States)
Although nontraditional asset classes at times have underperformed equities and may cost more than strategies that include only traditional assets, there are many reasons why institutional investors should consider alternative assets. 

Alternative Credit: Stay afloat as interest rates rise (NNIP, 2017)
(For compliance reasons, this paper is only accessible in certain geographies)
Alternative credit enables investors to benefit from the upside while suffering less from the downside. Sub-classes with floating rate coupons actually benefit from higher interest rates.

Cash-Flow Driven Investing, Private Credit and Real Assets (BNP Paribas AM, Jul 2018)
Today's low yields have exposed vulnerabilities in the traditional 60:40 model of asset allocation, causing many institutional investors to turn towards illiquid instruments and strategy-sets. 

What is Mezzanine Financing? (Pricoa Capital, Apr 2018)
Mezzanine financing is a type of junior capital that sits between senior debt and equity - the last point in the capital structure with the potential to provide significant liquidity for business owners without diluting their equity.

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