Alternatives - a timely opportunity
Given heightened volatility in equity markets and lower yields in fixed income, today’s market environment means investors need to consider non-traditional investment opportunities to meet their investment objectives.
Alternative investments are now being considered by more investors as an option that can offer both diversification* and relatively attractive yield opportunities. Alternatives cover a broad range of assets spanning real estate, infrastructure, transport, private equity, private credit, liquid alternatives and hedge funds.
Alternatives in a world of low yields
As alternatives can behave differently to traditional assets, they can provide relatively attractive yield# opportunities in the current ultra-low interest rate environment.
Alternative sources of income
Source: BAML, Barclays, Bloomberg, Clarkson, Cliffwater, Drewry Maritime Consultants, Federal Reserve, FTSE, MSCI, NCREIF, FactSet, J.P. Morgan Asset Management. Yields are as of 31.03.2020, except Direct Lending, Global Infrastructure, Europe and Asia Pacific (APAC) Real Estate (31.12.2019). Global Transport: Levered yields for transport assets calculated as the difference between charter rates (rental income), operating expenses, debt amortisation and interest expenses, as a percentage of equity value. Yields for each of the sub-vessel types are calculated and respective weightings are applied to arrive at the current levered yields for Global Transportation; Preferreds: BAML Hybrid Preferred Securities; Direct Lending: Cliffwater Direct Lending Index; U.S. High Yield: Bloomberg US Aggregate Corporate High Yield; Global Infrastructure: MSCI Global Infrastructure Asset Index-Low Risk; U.S. Real Estate: NCREIF-ODCE Index; Global REITs: FTSE NAREIT Global REITs; International Equity: MSCI AC World ex-U.S.; US 10-year: 10-year US Treasury yield; US Equity: MSCI USA, Europe real estate references Europe core real estate: IPD Global Property Fund Index – Continental Europe. APAC real estate references APAC core real estate: IPD Global Property Fund Index – Asia-Pacific. Euro Govt. (7-10 year.): Bloomberg Barclays Euro Aggregate Government–Treasury (7-10 year). Data is based on availability as of 31.05.2020.
# Yield is not guaranteed. Positive yield does not imply positive return.
Alternatives for uncorrelated returns
Generally, alternative investments have a low correlation to traditional assets such as equities and bonds and can offer diversification benefits to an overall portfolio. Increasingly, investors are looking to invest in strategies built to deliver uncorrelated returns to traditional asset classes. Even within alternatives, one asset can behave differently from another, providing additional diversification.
Quarterly returns of public and private market correlations
Source: MSCI, Bloomberg Barclays, NCREIF, Cliffwater, Burgiss, HFRI, J.P. Morgan Asset Management. RE – real estate. Global equities: MSCI AC World Index. Global Bonds: Bloomberg Barclays Global Aggregate Index. US Core Real Estate: NCREIF Property Index – Open End Diversified Core Equity component. Europe Core Real Estate: IPD Global Property Fund Index – Continental Europe. Asia Pacific (APAC) Core Real Estate: IPD Global Property Fund Index – Asia-Pacific. Global Core Infrastructure: MSCI Global Quarterly Infrastructure Asset Index (equal-weighted blend). US Direct Lending: Cliffwater Direct Lending Index. Global Private Equity: Cambridge Associates Global Private Equity Index. US Venture Capital: Cambridge Associates U.S. Venture Capital Index. Hedge fund indices include equity long/short, relative value, and global macro and are all from HFRI. All correlation coefficients are calculated based on quarterly total return data for the period 30.06.2008 – 30.09.2019. Returns are denominated in US dollars (USD). Data is based on availability as of 31.05.2020.
*Diversification does not guarantee investment return and does not eliminate the risk of loss.
Our Alternatives platform
With 50 years of delivering innovative alternative solutions across market cycles, our alternative investment engines are managed by highly specialised independent teams, backed by the global reach, vast resources and robust governance of J.P. Morgan Asset Management.
Through our Alternatives platform, we provide a spectrum of innovative investments that can play a key role in providing new sources of return and portfolio diversification.
Our Alternatives Capabilities
290+
Investment Professionals^
US$ 144 billion
AUM*
14
Investment Offices Worldwide
Outcome-Focused Strategies
EXPERTISE
Clients benefit from the specialist knowledge and global reach of our independent alternative investment teams.
PROCESS
Our outcome-oriented investment approach is based on proven fundamental and quantitative research, and a deep understanding of global markets.
RESULTS
As one of the world's largest Alternative asset managers, we have over 50 years of experience delivering innovative alternative strategies across market cycles.
Source: J.P. Morgan Asset Management, as of 31.03.2019. *AUM figures are representative of assets managed by the J.P. Morgan Global Alternatives group, and include some AUM managed by other J.P. Morgan Asset Management investment teams. ^Includes portfolio managers, research analysts, traders and investment specialists with VP title and above.
Focused solution
Our insights
With one of the longest track records in alternatives investing, our team has met and endeavours to continue to meet investor needs in different market conditions. Explore more of our insights.
For more information, please call or email us. You can also contact your J.P. Morgan representative.
1800 576 100 (Application enquiries)