Alternatives: Investing Across the Spectrum

More institutional investors are adopting alternatives, and at an accelerated pace, aiming to diversify and offset the effects of inflation, interest rates and the volatile economy. They are turning to diversified alternative strategies — private equity and venture capital, private credit, hedge funds, real estate, commodities and infrastructure — that may involve more risk but can help meet their long-term total-return objectives.

“Public markets overall have been a great place to be invested for the last decade,” said Wylie Tollette, CFA, head of client investment solutions at Franklin Templeton Investment Solutions. “But our capital market expectations anticipate that public market returns will normalize over the next 10 years, while cash yields on fixed income, in particular, will remain low. The search for inflation protection is rapidly driving investor interest in private real estate and other real assets.” A recent Prequin survey showed institutional investors plan to increase their allocation across alternatives (see chart).

Published in Pensions&Investments.