New yr, latest investments
Many of us have crawled into 2024 with a cautious optimism that the mental hardships all of us endured in 2023 is not going to be repeated. While this will likely still be a difficult task within the yr of the US presidential election, the long-predicted US recession has not materialized and the market appears to have more clarity on rates of interest. So a lot of us are preparing for brand new opportunities in a vivid latest yr.
In asset management, 2024 has brought renewed enthusiasm for alternative investments. The beauty – and complexity – of alternatives is that they encompass a lot, from art to real estate to non-public equity. This is usually a challenge for asset managers relating to how we best serve our clients. However, as private markets and alternative assets turn into increasingly democratized and accessible, our clients are increasingly intrigued by them. In fact, in his “World Wealth Report 2023” Capgemini advisable asset managers increase their concentrate on alternative investments to satisfy evolving client needs amid a more competitive outlook.
“Ultimately, we believe that most clients with an investment horizon of several decades can tolerate around 30% in alternatives.” Daniel Scansaroli, head of portfolio strategy in UBS’s CIO Americas office, said .
Five arguments for alternatives
1. Diversification is essential
We all the time emphasize this principle to our customers. A diversified portfolio is resilient, and alternatives are amongst the most effective diversifiers in the marketplace. As our clients search for higher returns and latest ways to speculate, alternatives could offer them something they might not have considered before or were too shy to try.
2. Huge potential
Despite the growing curiosity around them, Alternatives still accounted for under 14.5% of client assets in 2022. Only one in three asset managers plans to expand their portfolio to incorporate additional alternative products. Such modest numbers show real growth potential, especially as high net value individuals seek to emulate their counterparts in foundations and family offices. Large foundations, for instance, have around 60% of their assets invested in alternative investments.
3. Wealth ≠ Financial savvy
Our clients can have money to speculate, but don’t all the time understand how or where to speculate it. This is where we come into play. The role of a wealth manager isn’t more vital than when clients are searching for market outliers and latest opportunities. Alternative investments offer unique benefits, but in addition bring with them certain complications – tax issues, etc. – which asset managers must consider for and with our clients.
4. Customers can have alternatives but don’t realize it
What makes an investment shouldn’t be all the time obvious, and the guiding hand of a financial advisor can highlight the low-hanging fruit. While clients may own or need to own art, shoes, jewelry, and other collectibles, they might not realize the role such items can play of their portfolios.
Take the enduring Hermes Birkin luxury handbag. They are incredibly expensive, but may also increase in value. The annual return on a Birkin, which varies depending on material, size and scarcity, averages 5.7%. in line with a 2020 Deloitte report.
5. Digital is in demand
Due to the overall lack of transparency and the changing regulatory landscape, asset management firms are understandably cautious about digital assets. But investors – especially younger ones and people in Asian markets – are enthusiastic about digital options. Despite their volatility, cryptocurrencies remain the preferred digital asset and, like the choice sector normally, represent a rapidly growing market.
Wealth managers who can offer their clients insights and options within the digital space can stand out from the competition.
Asset managers can proceed to concentrate on their traditional strengths while searching for out and leveraging the most recent investment innovations for our clients. The instability and uncertainty of the previous couple of years shows how vital it’s to look beyond traditional securities and adopt a versatile mindset.
For asset managers, alternative investments offer quite a few opportunities and might help us overcome emerging market challenges through thoughtful allocations.
Photo credit: ©Getty Images / Steven Puetzer
