Alternatives offer new opportunities

28-Feb-2017

By Sarah Kendell

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Retail investors were increasingly embracing the flexible opportunity set and potential for increased returns offered by alternative investments, according to Blue Sky Alternative Investments.

Speaking to financialobserver, Blue Sky chief operating officer Rob Shand said average portfolio allocations to alternatives in Australia had risen from 5 per cent to 20 per cent over the past two decades, a growth that could be attributed to retail investors discovering the benefits of the asset class.

“Institutional investors have always had access to alternatives, but what we’ve seen over the last few years is the recognition that if the best of the best are allocating 20 per cent of their portfolios to alternatives, maybe that’s something that a high net worth individual or family office should also do,” Shand said.

The alternative asset manager’s Alternative Access Fund, offered through a listed investment company (LIC) structure, had closed its rights issue heavily oversubscribed at the end of 2016, demonstrating the demand from the retail segment of the market for an asset class that had traditionally been difficult for them to access, he said.

“We listed the fund two years ago with a market cap of $60 million and today it’s just shy of $200 million, so it’s basically tripled in size in the last two years, and it’s been trading at a premium to NTA (net tangible assets) for all of last year,” he said.

With a broad opportunity set across sectors, including property, private equity, agriculture and venture capital, alternative investment managers were able to take advantage of trends across a variety of different markets to generate returns, he said.

“If you are a pure-play real estate business, you have to be investing in real estate all the time, whereas if we think it’s not a great time to invest in a particular segment, we don’t have to – we have that diversity across the business,” he noted.

“For instance, we had investments in residential real estate a few years ago that performed very strongly, but we could see a lot of supply coming on and the risk-return balance shifting, so we stopped investing in residential and started with student accommodation.”

Private equity and venture capital were likely to be key areas of focus for the investment manager in the future, given the opportunities in sectors such as healthcare and technology, which were under-represented in Australia’s listed markets, he said.

“The other part which has also been growing very strongly is water and agriculture – it’s one of Australia’s strengths globally and with the food boom in Asia’s emerging middle class, it’s an enormous opportunity for us as a country and for our business as well,” he added.

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