The Conservative Alternative



printer icon Adobe PDF icon

This isn’t an article about politics.

It’s about the challenges investors are facing – and what can be done about it.

If you’re relying on income from your investments you’ll know that conservative asset classes like bonds and term deposits aren’t paying what they used to, potentially bringing down total returns on your portfolio. There’s no shortage of commentary describing your predicament.

But being told why you’re stuck between a rock and a hard place doesn’t count for much if you aren’t presented with alternatives.

One of the alternatives worth considering is the creatively named alternative asset classes. These alternative investments fall outside traditional share and bond markets and their performance is largely determined by different factors.

Let’s take the alternative asset class of private equity as an example.

Private equity is just a different name for private companies – companies that aren’t listed on the sharemarket. In broad terms a private equity manager achieves returns for investors by buying into private companies and seeking to generate income and growth from those assets.

Unlike investing in a large company listed on the sharemarket, private equity managers often buy a controlling stake (or even full ownership) of a private company and thus have a high level of board or executive control. This means they are often very active managers – always seeking to improve the value of the company it has acquired.

One common strategy typically involves efforts to restructure the company’s debt, taking greater control over its companies’ strategy and operations and to cut costs. This often means installing a new management team to execute the strategy.

There’s lower correlation in return generation.

Some of the key factors determining private equity value are different from those influencing broader share market performance. This is why private equity is considered an alternative investment.

Which brings us back to the rock and the hard place.

If the outlook for your returns from traditional investments looks subdued, alternative investments may be a smart way to diversify. And there are a range of alternatives.

In this video, Perpetual Private’s National Investment Specialist, Luke McMillan, explains why alternatives deserve serious consideration in light of the headwinds facing traditional investment markets.

Accessing alternative investments

For more information on how you can access alternatives contact your Perpetual adviser or request a call and we’ll be in touch soon.

Perpetual Private advice and services are provided by Perpetual Trustee Company Limited (PTCo) ABN 42 000 001 007, AFSL 236643.

This information has been prepared by PTCo. It contains general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. You should consider, with a financial or other adviser, whether the information is suitable for your circumstances. The information is believed to be accurate at the time of compilation and is provided in good faith. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.

No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Past performance is not indicative of future performance.