Allocate your capital wisely in the new era of multi-asset investing

Amid global headwinds...

Well known among investors, potential headwinds cloud the horizon in recent years. Portfolio diversification could be a good way to moderate risks without necessarily sacrificing returns particularly during turbulent times.

Yet, many funds claim to be diversified. Most multi asset funds indeed offer only a basic mix of equities, bonds and cash. That risks leaving investors exposed in a world where expected equity and bond returns have fallen and appear to be more closely correlated.

The genuine diversification with alternative assets

As such, the best starting point is genuine diversification. The real value of multi-asset investing is being able to combine a range of asset classes with attractive return prospects but different drivers in order to achieve consistent returns and reduce downside risk.

The potential of alternative assets, which includes asset classes such as renewable infrastructure, social infrastructure, property, aircraft leasing, litigation finance and health-care royalties, offers limited correlation to the economic environment.

Revenue drivers from alternative assets are different to what drives traditional equities and bonds, enabling them to provide a recurring potential income stream that should remain largely unaffected by market turbulence.

Historically such alternative assets have been illiquid, meaning they can be difficult to buy and sell at short notice. However, over the past decade they have become more readily available through listed investment companies that are tradeable on exchange.

Such investment companies have opened up a new universe of opportunities for non-professional investors wanting genuine diversification without illiquidity.

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