Many of the early launches were investing in the American railway boom: they were, perhaps, the original infrastructure funds - the alternative assets funds of their day.
Research from the Association of Investment Companies (AIC) suggests that over a third (39%) of the investment company sector by assets now invests solely in alternative assets, and over 80% of this is in investment companies that have been launched over the last decade. The new AIC factsheet: Something a bit different: A guide to alternative assets looks at why investors might like to consider alternative assets, what might be considered alternative assets, as well as the risks, key things to remember, and the income advantages of many of these funds. Also discussed are the advantages of the closed-ended investment company structure, valuations, as well as discounts/premiums.
Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: “Alternative assets are a broad church and there’s a good deal of choice for investors – not least from an income perspective. The investment company structure is an appropriate way of accessing alternative assets, because managers can take a long-term view without having to worry about inflows and outflows. But there’s also a lot to consider, and we hope this factsheet is a useful tool for investors and advisers looking to find out more about alternatives.
“Much of the growth story we have seen in the alternative assets sectors over the last decade has been fuelled by investor appetite for yield. There are many types of alternative asset classes including property, private equity, hedge funds and specialist debt. Taking a look at infrastructure, it is now 10 years since the first Sector Specialist: Infrastructure investment companies were launched: HICL Infrastructure in March 2006 and International Public Partnerships in November 2006. Today, the Sector Specialist: Infrastructure sector as a whole has an average yield of 4.9%, although the sector is also on a correspondingly high premium; and the issue of premiums and discounts is touched on in the factsheet.”
Property
The growth of the higher yielding property investment company sectors has also taken off over the last decade, although the first launches were slightly ahead of the curve: for example Standard Life Investments Property Income was launched in December 2003, F&C UK Real Estate Investments was launched in June 2004 and Schroder Real Estate in July 2004.
Whilst much of the growth in alternatives over the last decade has been driven by the demand for yield, for example in the infrastructure, property, and debt sectors, some investment companies investing in alternative assets have been around for considerably longer. For example, Electra Private Equity was launched in 1976, although there have been launches in the Private Equity sector in every decade since.
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