Macquarie calls for increase in alternative asset exposure
By Jason Spits
INVESTORS should increase their exposure to alternative assets from 5 to 20 per cent through a greater spread of investments and in turn boost portfolio diversification, according toMacquarie Funds Managementhead of asset allocation Robert Credaro.
Credaro’s comments, delivered at the Asset Allocation Forum in Sydney last week, are contrary to the commonly accepted wisdom of allocating a maximum of 5 per cent to alternative assets in constructing portfolios.
He says the 5 per cent allocation is accepted as the norm as usually only one type of alternative asset is considered and that can carry high risk. However, he says allocations can be increased via a range of alternative assets without significantly increasing risk levels.
The spread of alternative assets recommended would include private equity, infrastructure, commodities and hedge funds, which Credaro says can build a level of defensiveness into the portfolio.
“Macquarie Funds Management research shows that investors who include a mix of four or five alternative assets, comprising up to 20 per cent of their portfolio, can potentially benefit from improved upside while reducing the volatility of their alternative asset allocation,” Credaro says.
“The fact is that if you increase the alternative asset allocation to up to 20 per cent of a portfolio and diversify across four or five carefully selected alternative asset classes, you can get diversification and volatility close to that available from listed equities.”
However, moving beyond four to five alternative assets would result in too much complexity within a portfolio without extra return, with Credaro stating a portfolio should be constructed with a consideration of risk allocation over asset allocation.
AUTHOR
Jason Spits
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
