How Allocators Are Optimizing Alternative Investment Programs | SALT iConnections Asia | Summary and Q&A

TL;DR

Allocators are considering alternative asset allocations despite rising interest rates, driven by the shift in importance between private and public markets and the availability of technology for individual investors. Diversification and geographic allocation are key considerations.

Key Insights

• 🔒 Private markets, including private equity, private debt, real estate, and infrastructure, are becoming a strategic priority for wealth managers and individual investors due to their outperformance and diversification benefits.
• 🔒 The shift in importance between private and public equities is driven by the delayed IPOs and higher valuations of successful private companies, leading to value creation in the private markets.
• 🎓 Technology and education are eliminating barriers for individual investors to access alternative investments and diversify their portfolios.
• 😮 Allocators are considering the impact of rising interest rates on real estate investments and exploring opportunities in real estate credit.
• 🚨 Geographic diversification and exposure to emerging frontier markets are gaining importance in optimizing portfolios and accessing uncorrelated returns.

Transcript

welcome I'm so excited to be here today with such an amazing and impressive group of individuals um we're here today to talk about how allocators are optimizing their alternative investment portfolios but before we get started I'll just do some quick introductions Marco bizero is with I Capital he's head of international I capital is a platform tha... Read More

Questions & Answers

Q: How are allocators thinking about portfolios now for alternative investments?

Allocators are recognizing the importance of alternative asset allocations and are considering factors such as inflation concerns, desire for long-term returns, and yield enhancement opportunities in private credit and infrastructure.

Q: What impact have rising interest rates had on real estate investments?

Rising interest rates have led to a hit on real estate investments due to higher costs of debt. However, when considering a diversified portfolio and long-term investment horizon, the impact may be offset by the positive externalities of funding local infrastructure.

Q: How are individual investors gaining access to alternative investment opportunities?

Technology and education have eliminated many barriers for individual investors to access alternative investments. Platforms like I Capital are facilitating access for advisors and their clients, democratizing access to diversification and strategic portfolio building.

Q: What role does geographic diversification play in optimizing portfolios?

Geographic diversification is crucial for investors looking for uncorrelated returns and capitalizing on emerging markets with high growth potential. Allocators are recognizing the importance of expanding their portfolios beyond their home country bias and considering investments in areas such as emerging frontier markets.

Summary & Key Takeaways

• Assets in alternatives have grown significantly over the past 15 years, driven by low interest rates. Despite rising rates, allocators are still prioritizing alternative asset allocations.

• Investors are turning to private credit and infrastructure in response to inflation concerns and the desire for long-term returns. Real estate debt and infrastructure present opportunities for yield enhancement.

• The denominator effect, where portfolios were overallocating to alternatives, may diminish as interest rates rise, leading to more balanced allocations across various asset classes.