The recent market environment has been quite challenging for investors. With mounting volatility and looming economic uncertainty, investors want to step away from the traditional mix of stocks and bonds. Thus, HSBC Asset Management urges investors to consider alternative investments as powerful diversification tools in their portfolios.
The asset manager debunks the myth of alternative investments being highly risky and points to low-moderate risk assets like multi-strategy hedge funds, core infrastructure equity, and senior secured private credit.
According to the asset manager, the ‘democratisation of alternatives’ has brought in several private wealth investors, including retail and high-net-worth individuals, on board. “It is anticipated that private wealth investors will account for 10.6% of all capital raised by private equity funds by 2025, compared to 8% in 2015,” stated HSBC.
Additionally, the asset manager believes that the appeal of alternative investments is poised to grow mainly because they offer benefits like diversification, downside protection, and enhanced returns. “Alternative asset classes tend to exhibit low correlations with traditional equities and fixed income, hence bringing about diversification benefits such as reduced portfolio volatility and improved risk-adjusted returns,” opined Simon Li, Asia Pacific regional Product Specialist, HSBC Alternatives.
Next, the asset manager talks about how private equity and venture capital are the growing class of alternative investments. According to John Oldham, Asia Pacific Regional Lead, HSBC Alternatives, “It will be wise to consider investing in private equity and venture capital if investors want to access some of the most innovative and fast-growing companies, such as those in the technology and healthcare space. “
HSBC also mentions the growing popularity of alternative investments in the Asia Pacific region. Private capital in the region has grown at a CAGR of 20.1% while outpacing North America and Europe by 80%, as per the asset manager.
Finally, HSBC contends that, in the future, alternatives will no longer be considered peripheral investment options. The asset manager believes that they will soon become too important for investors to overlook.
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