Increasing economic uncertainty boosts alternative investments
New research has found that high-net worth private investors are increasingly turning to alternative investments in the face of increasing economic uncertainty.
A survey conducted among clients from Connection Capital found that 35% of those that responded now allocate at least a fifth of their portfolio to alternative assets, up from 26% last year; 54% said they had increased their portfolio weightings to alternatives in the past 12 months.
Specialist private client investment firm Connection Capital said that investors are looking to reduce their exposure to mainstream assets like quoted equities and bonds, following recent market volatility; investing in alternatives allows them to diversify their portfolio with assets that are uncorrelated to mainstream market movements.
‘Alternatives’ covers a wide variety of asset types, including private equity and commercial property, private debt and direct lending; in comparison, 57% have less than half of their portfolio allocated to listed equities.
Looking ahead, only 11% plan to increase their exposure to listed equities in the year ahead, while 35% said they plan to increase their exposure to alternatives.
‘The traditional portfolio mix is being shaken up,’ said Claire Madden, managing partner at Connection Capital. ‘More and more experienced private investors are seeing the merits of diversifying across alternatives to boost returns and resilience.
‘To an extent this trend is being driven by economic uncertainty, with Brexit and other geo-political tensions still buffeting stock markets, prompting investors to rethink what they are investing in and how much. But it’s also due to a growing awareness of – and access to – the range of different opportunities that exist within alternatives.’
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