In 2020 many asset owners will be motivated to cross boundaries in search of stable returns. This is because despite big gains for equities and bonds during 2019, institutional investors are worried about low yields and slow growth hurting performance.
Crossing boundaries often means leaving a comfort zone, thinking outside the box, having an ‘alternative’ view.
Alternative investing has matured over the last 30 years and is becoming part of the mainstream, as it gathers greater attention and acceptance from both regulators and investors.
It is, however, also entering a period of considerable growth and change due to macroeconomic drivers and post-crisis financial industry regulation.
Furthermore, as the main suppliers of capital for alternative assets, institutional investors’ growing confidence and investment capabilities are key drivers of many future trends in the industry.
This is, by no means, something new, but rather the continuation of a trend that gained traction a handful of years ago, when investors still struggled with the pressure to reduce fees and increase returns.
An even more fundamental trend in the asset management industry is the shift from DB to DC pensions, which may lead to a significant influx of retail capital into the alternatives sector.
Challenged to get what they need from traditional assets, asset owners have, in many cases, turned to private markets. Investors believe private assets are better suited to deliver portfolio diversification and attractive returns.
Many support the idea that the returns of private assets are worth the liquidity trade-off, and are prepared to pay a higher fee.
Certainly, investing in a wide range of asset classes will result in more consistent performance across a wide range of economic conditions, and this spread of different investments will help reduce the risk of having all your assets in one pot.
Venilia Amorim, editor, IPE.com