This website uses cookies in order to improve user experience. If you close this box or continue browsing, we will assume that you are happy with this. For more information about the cookies we use or to find out how you can disable cookies, see our Cookies Notice.

Alternatives

Alternatives portfolios

Due to their distinct characteristics, we take a differentiated look at selected liquid and illiquid alternative investments.1

Liquid alternatives

Discretionary macro and CTAs

We think that both discretionary global macro and systematic/commodity trading advisor (CTA) strategies can bring to a portfolio a useful, idiosyncratic and diversifying risk-return profile. As equity markets have rebounded, the correlation of these types of strategies to the MSCI World Index has remained firmly negative, which suggests they could prove to be an effective source of diversification, should equity-market sentiment deteriorate again. In regard to global macro strategies, those focused on inter-asset-class relationships and geographic dispersion look particularly interesting. Commodities, equity indices, bonds and credit indices all offer distinct sets of opportunities. The United States, Europe and emerging markets have been exhibiting different patterns since the indiscriminate sell-off at the beginning of the year. CTAs could well profit from any renewed weakness in equity markets, while also capitalizing on another wave of flight to quality through long positions in U.S. Treasuries.

Liquid alternatives

Illiquid alternatives2

Private equity

Total capital raised followed the usual seasonal slowdown in the first quarter of 2016, dropping back to $66 billion. However, the proportion attributable to buyouts rose to its highest in any first quarter of this decade, with $39 billion aggregate capital raised. Dry powder remains high with $775 billion in capital available as of March. This is contributing to stubbornly high valuations, with private-equity acquisition multiples remaining above the 10-year average for all deal sizes in Europe and for medium and large deal sizes in the United States. Fundraising is expected to remain generally healthy in Europe for the remainder of the year, despite political risks, but private-equity deals in the U.K. have fallen to levels not seen since 2008.

Infrastructure

Investor demand is still healthy for unlisted infrastructure, helping valuations for the asset class to remain broadly above their long-term average. Deal flows have continued to grow in the first quarter of 2016 with 224 deals completed. Asia’s share rose to 37% of the global reported deal value. However, the inherent commodity exposure of many sectors in the region still presents risks, as could China. Economic fundamentals are also a headwind for unlisted infrastructure in the United States, though pockets of opportunities remain. Utilities can provide long-term, stable cash flows, that when coupled with fair valuations make this sector look interesting amidst continued global uncertainty.

Illiquid alternatives

ref-1

1 These portfolios may not be suitable for all investors.

ref-2

2 Not available in discretionary portfolios. Hedge funds and other investments classified as non-mainstream pooled investments are not considered as suitable investments for retail clients in the United Kingdom. Illiquid investments may be difficult to acquire or dispose of. The product’s ability to respond to market conditions may be impaired and investors may experience adverse price movements on liquidation.

Related Articles

Jul 13, 2018 New Chart of the week

Chart of the week

China's monetary base looks set to grow faster again soon

Jul 06, 2018 Chart of the week

Chart of the week

On trade, the Trump administration might have some powerful allies.

Jul 03, 2018 Investment Traffic Lights

Investment Traffic Lights

Our tactical and strategic view

Jul 03, 2018 CIO Special

Dollar pros and cons

The dollar has already reached our target. Currently, the arguments are balanced.

Jun 29, 2018 Chart of the week

Chart of the week

Do weak currencies hurt emerging markets?

Jun 22, 2018 Chart of the week

Chart of the week

In the line of fire

Jun 21, 2018 Macro Outlook

Ten years after

The long reach of the financial crisis

Jun 15, 2018 Americas CIO View

Americas CIO View

Inflation: Sometimes it skips a generation

Jun 15, 2018 Chart of the week

Chart of the Week

Looking at real federal funds rates, not a lot has happened after 7 hikes

Jun 08, 2018 Americas CIO View

Americas CIO View

Is it time for U.S. Small Caps to shine? If you pick them right

Jun 08, 2018 Chart of the week

Chart of the week

In some areas, Italy is actually doing quite well

Jun 04, 2018 Investment Traffic Lights

Investment Traffic Lights

Our tactical and strategic view

Jun 01, 2018 Chart of the week

Chart of the Week

Why emerging markets may be less vulnerable than they used to be

May 29, 2018 CIO Flash

Euro crisis 2.0?

Italy's political woes are dragging down markets while boosting our dollar call.

May 29, 2018 Americas CIO View

Americas CIO View

What do investors want from active managers?

May 25, 2018 Chart of the week

Chart of the week

A tale of two economies in the Eurozone periphery

May 24, 2018 CIO Flash

Italy's new coalition

Italian political turmoil might prove less worrisome than many think.

May 24, 2018 Americas CIO View

Americas CIO View

Oil near normal, Energy profits still below, but limited upside

Feedback

Please let us know what you think about this article/page.