Russell’s researchers talked to 114 institutional investors about their investment plans and found that many of them had already opted for more exposure to alternatives. The report found that 22.4 per cent of the investment portfolios, which totalled $1.1 trillion in value, was invested in alternatives including private equity, hedge funds and real estate investment trusts. This totalled $246 million in value terms.
Russells said that the research indicated that alternatives would become more mainstream over the coming three years as more and more pension funds take their cash out of stocks and bonds and put it into alternative asset classes.
AAA’s analysis partner, Anthony Johnson, said, “it’s telling that so many pension funds and other institutional investors are moving towards alternatives.
“The general consensus among investors is that equity markets are still extremely volatile and many are steering clear of stocks and shares as a result.”
According to Russells, a third of the investors questioned said that the "current low return environment in traditional assets” were to blame for their move towards alternatives. AAA claims that alternative assets can deliver healthier returns than traditional assets and hold less risk.
“Those investing in timberland, for example, can hold onto their asset and just watch it grow if timber prices are down when their trees reach maturity. It’s hard to think of any traditional asset class that physically grows over time.”
AAA supports ethical investment projects and sustainable forestry plantations such as those run by firms like Greenwood Management in Brazil. “Investing in plantations is becoming more attractive as people are increasingly looking for tangible assets in exchange for their investments.”
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