Liquid Alternatives: As Rates Rise, Multi-Asset Fund Manager Pendal Recommends Liquid Alternatives

Higher rates are a headwind for illiquid alternatives, says Pendal multi-asset portfolio manager Alan Polley.

According to Alan Polley, a portfolio manager at Pendal, it is time to consider moving from illiquid alternative investments to liquid alternatives. Polley believes that illiquid assets, which have been benefiting from a falling interest rate environment, are no longer supported by a tailwind, and the rising interest rates are creating headwinds for these assets.

Illiquid assets are private, or unlisted, assets such as property and infrastructure, and they tend to be sensitive to interest rates in terms of financing costs and discount rates applied to future earnings. Illiquid assets tend to promise a liquidity risk premium, but the question is when that risk will eventually be felt.

The economic environment for these assets has changed, and investors should be concerned about the true risk of illiquidity, especially if their situation unexpectedly changes. In addition, there is a high likelihood that all illiquid assets will experience a simultaneous impact, resulting in significantly risky outcomes.

Shifting to liquid alternative investments will be a theme for this year, says Polley. Investors should look for assets that offer true diversification benefits, other forms of returns besides traditional equities and bonds, and have long-term potential, such as sustainable investment companies and investments with inflation linkage.

Related Story:  DIPC, A Liquid Alt Offering From FundFront And DipSea Capital

Photo by Anil Sharma on Unsplash

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Latest Alternative Investment News
FinTech: Klarna’s All-In Efforts To Achieve Profitability Getting Traction
May 26, 2023     FinTech, News

Swedish fintech company Klarna achieved a significant improvement in its financial performance during the first quarter, as it halved its net loss compared to the same period last year. The…
Alternative Investments/AI: Euclidean Technologies Launches ETF For AI-Selected Value Stocks

Seattle-based investment advisor Euclidean Technologies Management has launched its first exchange-traded fund (ETF), the Euclidean Fundamental Value ETF (ECML US). The actively managed US equity fund utilizes artificial intelligence (AI)…
Venture Capital: Matrix Partners Raises $550M For Its Fourth India Fund
May 26, 2023     News, Venture Capital

Matrix Partners India, a venture capital firm focused on investments in India, has announced the closure of its latest fund, securing over $550 million in commitments. This new fund from…
Artificial Intelligence: AI Helps Researchers Find A Compound To Kill The Drug-Resistant A. baumannii Bacterium

Scientists at MIT and McMaster University have used artificial intelligence (AI) to identify a new antibiotic that can combat drug-resistant infections caused by Acinetobacter baumannii. The bacterium is commonly found…