Multi-alternatives Strategies

Investing in alternative assets can help strengthen portfolio resiliency and expand diversification.

Strengthening portfolio resiliency with expanded diversification

• Investments in private equity, private core infrastructure and private real estate can collectively help bring alpha, inflation risk mitigation and dislocation opportunities to a traditional portfolio.
• A diversified multi-alternatives allocation can provide flexibility in pursuing investment goals by potentially increasing returns, reducing volatility and better diversify overall portfolio exposures, irrespective of the risk appetite of the investor.
  
• Historical segment rotation in core alternatives and generally much wider manager return dispersions in non-core alternatives offer considerable potential to enhance performance through active management.  
  
• At this point in the cycle, credit-like alternative assets, equity-like alternative assets with pricing power and secondary investments appear particularly attractive.
  

Private Equity

The long-term outlook for private equity remains broadly attractive, offering potential opportunities to enhance portfolio return and reduce volatility.

Diligent manager and asset selection will be crucial in the current market cycle

• Last year’s slowdown in deal activity reduced upward pressure on valuations.
  
• In the current landscape, secondaries and co-investments appear to offer emerging investment opportunities.
  
• On the buyout side, we continue to favour the small mid-market given generally lower entry multiples, greater value creation potential and broader exit avenues.
  
• Return dispersions are likely to expand even more in the current cycle, making diligent manager selection even more critical to capture top-quartile returns.
  

Real Estate

Commercial real estate investments have the potential to offer higher income than bonds with inflation-correlated appreciation.

Pricing resets offer considerable upside potential

• The rapid run-up in interest rates and resulting deal activity slowdown have meaningfully reset property valuations from early 2022 peaks, offering opportunities to invest in select, high-quality assets at significant discounts.
  
• Broad repricings have occurred across sectors, creating meaningful value in properties that remain fundamentally solid.
  
•  Opportunities are also being driven by major shifts in how people consume, live and work due to changes in demographic, technological and social trends that continue to reshape how people use real estate.
  
• We see potential in single-family rentals, last-mile logistics and development optionality as the market begins to recover through the current cycle.
  

Core Private Infrastructure

Core infrastructure should continue to benefit from strong structural tailwinds around the need to modernise, replace and decarbonise existing assets.

Attractive opportunities for long-term private investors

• While the asset class has seen a compression in risk premia, valuations have remained largely resilient, supported by the essential nature of these services, stable cashflows, as well as explicit and implicit inflation pass-through attributes.
• The recent more challenging fundraising environment as interest rates have risen has created opportunities for well-capitalised private investors.
• We expect opportunities in 2024 to be driven by the magnitude of investment required for the energy transition, closed-end funds looking for exit opportunities and corporates looking for additional capital outside of the public markets.
  
• Active management remains key in the segment given the wide dispersion of asset and strategy returns, and continued uncertainty around the current macroeconomic environment.