INVESTMENTS
ALTERNATIVE INVESTMENT STRATEGIES TO TARGET SUSTAINABLE YIELD
Billy Brown Strategic Relationship Director Triple Point
Today , investors face the extreme pressures of an ultra-low interest rate environment , crowded markets and alltime high valuations for equities and bonds . The Consumer Prices Index ( CPI ) reportedly rose by 2.5 % in the 12 months to June 2021 , with future rises predicted . This will pile additional pressure on savers who will be unable to maintain the purchasing power of their cash over time . What ’ s more , traditional options that typically provide strong returns saw a notable downturn in performance last year . Nearly 500 companies listed on the London Stock Exchange cancelled , cut or suspended dividend payments in 2020 . Although some companies have bounced back in Q2 2020 , on the other end of the spectrum we ’ ve seen yields on Government bonds remain consistently low . This is an unprecedented environment , especially for those that depend on income for their spending needs and future planning , including pensioners , private savers , charities and foundations . Many have been forced to take disproportionate investment risks to satisfy their needs .
Alternative investments This is the backdrop for alternative investments , which are playing an increasingly prominent role for investors and savers . We are seeing an acceleration in the demand for positively yielding alternative investment strategies precisely at a time of increased hunger for investments that deliver long-term sustainable performance with a broader societal purpose – demonstrated by the levels of capital flowing into ESG and sustainable funds , with assets touching a record high in Q1 2021 . Alternatives are already commonplace for a wide range of investors . They can mean anything from real assets , such
as property or digital infrastructure , to private direct lending . Choosing the right vehicle and strategy is a challenge , and there are several options investors could consider , the most straightforward of which are in three key areas : two of which are in fixed capital vehicles ( investment trusts and real estate investment trusts ( REITs )), and the third is in leasing and lending strategies .
Investment trusts Investment trusts are an appealing option for investors and savers . Depending on the strategy and sector , they can provide a diversified , yet robust , sustainable investment portfolio that offers the dual benefits of long-term capital return and income . In 2020 , investment trusts achieved an average 17.8 % total return whilst the UK stock market saw a decline of 9.8 %. With more than 400 trusts currently trading on the UK stock market , focused on more than 30 different sectors , there is an abundance of choice .
Real estate investment trusts Real estate investment trusts ( REITs ) invest across a broad range of property types and can provide investors dividend-based income , transparency , liquidity , inflation protection and portfolio diversification . Historically , they have proved to be an attractive way for investors to gain exposure to the world ’ s largest asset class , while gaining the liquidity of a tradeable security . For investors wanting to make a positive impact on society , social housing REITs represent an opportunity to generate sustainable , long-term , inflation-linked income while helping to address one of society ’ s most pressing challenges .
Leasing and lending strategies Direct lending is an asset class that was traditionally the preserve of banks and large financial institutions but is now being targeted by a much broader spectrum of investors . Having evolved over the last decade , the non-bank lending sector addresses the increasing demands for supporting SMEs and other groups underserved by mainstream lenders .
The outlook for investment Investors would do well to capitalise on the current opportunity to diversify their portfolios with alternative investment strategies in order to optimise their chances of sustained and reliable returns . There remain clear alternative options for those seeking profitable long-term investment strategies , designed to create value for communities and the people who live and work in them . Investment trusts , REITs , and leasing and lending strategies , all have the potential to meet the needs of investors with sustainable goals and priorities .
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