‘Alternative’ investments to grow beyond $10 trillion

A 60/40 allocation to equities and bonds is no longer likely to be enough to offer investors the outcomes and diversification required to reach their long-term objectives – alternative investments are increasingly critical to the investor’s portfolio, an analyst has predicted.

The warning comes ahead of the eighth edition of the world-leading, invitation-only Alternative Investment Management (AIM) Summit, taking place in Abu Dhabi next month.

The AIM Summit, being held on April 7th at the Four Seasons Hotel, is a gathering for industry leaders in the world of alternative investments, including blockchain, cryptocurrency, hedge funds, private equity, venture capital, and private debt.

Zachary Cefaratti, CEO of Dubai-based Dalma Capital – a prominent alternative investment accelerator – and strategic partner of AIM Summit, said he was forecasting huge growth across the sectors.

Assets

“We estimate the alternative investment industry to currently represent more than $10 trillion in assets under management today,” he said.

“Based on data from Preqin, we forecast this to grow to $14 trillion by 2023. As we enter the late stages of economic and credit cycles, investors increasingly consider alternative investment and uncorrelated assets.

“The AIM Summit brings together the largest and most sophisticated investors in hedge funds, private equity, private debt, venture capital, and other alternative investments – connecting them with the world’s leading alternative investment managers.”

A typically so-called ‘diversified’ portfolio of stocks and bonds has, over the last decade, been almost in step with the stock market. Alternative investments will, according to the experienced analyst, typically reduce this correlation and lower the erosion impact of market volatility.

Raha Moradi, the Managing Partner of AIM Summit, notes: “Alternatives have a valuable place in an investor’s portfolio. A speculator seeks a quick return and is willing to take on risk. But an investor actively tries to minimise risk and does so by mingling together asset classes with low or negative correlations with each other.

“AIM Summit is a platform for discussions on alternative investment developments, global market conditions, and latest trends for more than 300 figureheads from 15-plus countries.”

Expert voices

The confluence of expert voices and panellists includes Dr Ryan Lemand, CEO of ADS Investment Solutions, and David Gibson, President and CEO of Gulf Analytica.

Ahead of the summit, Dr Lemand has been urging investors to be cautious about market volatility.

“The world’s economic growth seems to have reached a peak, and despite financial markets still exhibiting momentum, it is time for investors to position for increased volatility over the coming year,” he said.

“Systematic strategies and emerging markets can be good alternatives to developed financial markets, especially GCC countries.”

In a similar vein, Mr Gibson affirmed: “Fintech companies continue to send shock waves through the finance industry. It is not a question of disruption but rather of total transformation.”

Ms Moradi stressed that alternative investments could be the answer to smooth out volatility across portfolios.

“AIM Summit will, once again, be attended by some of the largest regional institutional investors and family offices, as well as some of the world’s smartest and brightest fund managers in the alternative space,” she said.

“Why? Because alternative investments are perhaps more important than ever in helping lower volatility, bolster returns, and widen diversification for investors around the world.”

This year’s sponsors include ADS Investment Solutions, ROI Securitisation, Emirates Wealth, Apex, Mercer, Fitch Ratings, Lecocqassociate, Phoenix Advisors, and Dalma Capital Management Limited.