Investors Turn to Alternatives in a Dislocated World
The current environment creates challenges, but also opportunity, for institutional investors
Fidante Partners, the international investment management business, hosted an array of leading asset managers, former politicians and industry experts at its annual investment conference. On the agenda was the growing relevance of a broad array of alternative investment strategies and their importance in an increasingly dislocated environment.
Speakers discussed the important role alternatives are playing in helping investors achieve their investment objectives in an era where regulatory, geopolitical and economic factors, and a difficult environment for traditional investments, continue to create significant challenges.
Tom Skinner, head of research and manager selection at Fidante Partners, says:
“You can point to many things in this world that feel dislocated, and this is even before Article 50 has been triggered and the consequences of a Trump presidency become evident. Financial institutions are constrained by contradictory government interventions and there is widespread scepticism about the benefits of world trade, and even capitalism itself, amid perceived wealth inequality. Add to this rapid technological advancement, global warming, a growing demographic headache, and uncertain paths for inflation and economic growth. Moreover, investors are rightly wary for the potential for conventional investments to deliver required returns in an environment of high valuations.”
It is within this context that institutional investors are really sitting up and taking notice of the alternative sector when deciding portfolio allocations. The alternative asset market has doubled in size since 2005 and growth in AUM is significantly faster than it is in traditional asset classes. This trend looks set to be maintained as investors reconsider their approach to asset allocation to meet growth and income expectations.
A series of panel discussions and presentations from experienced industry experts provided unique insights into the most pertinent themes in alternatives today:
- Felix Martin (partner & co-founder of 1167 Capital) championed diversification into non-G10 government bonds markets as being part of the solution in the hunt for income, given the capacity of these markets.
- Bill Ackman (CEO and portfolio manager at Pershing Square Capital Management) argued that activist investing can be a force for good and is the best way to keep businesses healthy and honest.
- Dr Chris Donegan (managing director at Invention Capital Associates), Bruce Garelick (managing partner and chief investment officer at Garelick Capital), and Siraj Khaliq (partner at Atomico Partners) focused on the technological challenges permeating through society and investment opportunities that these present for both public and private investors.
- Rt Hon Sir Edward Davey, former secretary of state for energy and climate change, discussed how crucial it is to investors for political and other risks to the energy market to be reduced, and Michael Bonte-Friedheim (founding partner and group CEO at NextEnergy Capital) provided perspective into renewable energy from an investor’s point of view.
- Floris Hovingh (head of alternative capital solutions at Deloitte) discussed the growing importance and penetration of direct lending in Europe.
- Dan Higgins (chief executive at Marylebone Partners, David Baker (portfolio manager at Perella Weinberg Partners), Andrew Davies (portfolio manager at CVC Credit Partners) and Jerry Haworth (CEO at 36 South Capital Advisors) discussed the investment dynamics within traditional asset classes, whether diversification can be achieved in them during bear markets, and the role of alternatives in diversified portfolios.
- Dr Sushil Wadhwani (founder and CEO of Wadhwani Asset Management) outlined his view that markets that are priced for current, unsustainable central bank policy, that there is a mismatch between return expectations and what can be achieved today, and how these can be addressed with a new investment strategy.