There’s talk of an Alternative Universe

Tony Trescothick

Earth scientists are learning more every day about the World we can see and increasingly, the World we can’t see.  Nano-technology and electron microscopes are helping them to discover new life forms and ecologies almost daily. Meanwhile, astro-scientists are learning more each day about the Universe we can see – and apparently, the Universes we can’t see!

In astronomy circles Alternative Universes are purely theoretical at the moment, but in investment circles, I am pleased to say that the “Universe of Alternatives” is vast and positively a reality.

 

“Alternative investments” is a wide-ranging term which includes many asset classes and strategies that, as readers will know, are essentially anything other than equities, bonds and cash.  It’s a “catch-all” term that has almost as many permutations as there are stars in the sky.

However, the problem is that many Alternatives have been crafted that are great in theory but often prove difficult in practise.  The strategy, when being assessed, needs to include considerations that include suitability for the investor-types to whom they are being offered.  For example, insufficient liquidity can rear its ugly head all too often, leading to gating and suspension.  Never a nice experience for either manager or investor.

Recent multiple suspensions across a number of asset classes has led to a general avoidance of Alternatives by many investors and their advisers.  This may be a good thing if their investment outlook is to be content with the returns and volatility provided with the mainstream investment classes that make up traditional investments.

However, as has been reported widely, many large investors including some of the World’s  SWFs, are increasing their allocation to Alternatives significantly.  Clearly, their extensive resources permit the flexible attitude that Alternatives investing requires, and thus permits them to fund investments such as infrastructure, technology and life sciences.

Generally, though, for the average private investor without substantial investable capital, Alternatives can be a step-too-far.  Liquidity is possibly the key concern here as individuals may not have the flexibility to let a longer-term Alternative investment run its course.  Many mega-investors will simply not want to see their money back quickly whilst some private savers have no choice should their health or personal circumstances take a turn for the worse.

So, for those who have the resources, the expertise and the investment horizon required for sensible Alternatives investing, what is available within this Universe of opportunity we mentioned earlier?

The obvious answer is “practically anything” but to be more specific, some Alternatives that may be worth considering could be Student Housing and its complementary bedfellow Co-living, Long Term Care Provision, Renewable Energy and Private Debt.  These asset classes now include such a wide range of opportunities, this whole article wouldn’t have the space to fit them all in.

Want to read the full article? Click here to read the full article in CIFA’s April newsletter. If you are interested in hearing more from Tony, then click here to read his thoughts on PBSH and our new platform.

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