For investors prepared to try the unfamiliar, the returns can be very goodby Andy Davis / May 19, 2016 / Leave a comment
Published in June 2016 issue of Prospect Magazine
The past few years have been among the most challenging that most investors will have faced—whether they are running a major pension fund or an ISA portfolio. The traditional places to put your money—high-quality bonds or dividend-paying companies—have become worryingly expensive by most people’s standards and this has induced some to venture into less familiar terrain.
Among the biggest, institutional investors this “reach for yield” has seen growing demand for so-called “alternative assets.” These range from well-tenanted commercial property with predictable rental income, to more esoteric opportunities such as infrastructure (everything from oil and gas pipelines, to airports and hospitals), private equity funds (usually comprising controlling stakes in a portfolio of private companies) and funds that make loans to mid-sized companies.
These, however, are just the more conventional end of the spectrum of alternatives. Further along sit funds that own renewable energy assets (mainly solar farms and wind turbines that attract fixed government subsidies), others that lend via peer-to-peer platforms to small businesses and individuals, provide commercial mortgages and so on. Some, such as private equity, concentrate on delivering capital growth. Most others offer investors a higher income than they will find elsewhere by concentrating on specialist business lending of some sort.
For investors prepared to try the unfamiliar, the returns can be very good and the opportunity to diversify one’s risks welcome. But for big institutions there are serious chall…