Shangri-La Rises From the Ashes
1 October, 2016
Investing Beyond the Mainstream: Credit and Cash Enhanced
1 October, 2016AFR Weekend, Smart Money, October 2016
Alternative investments can get a bad press. “We start out,” says James Purvis, “with the mindset that an alternative asset is usually an alternative to making any money.” Purvis is part of the PHAROS Investment Committee that helps 46 affiliated advisory practices with their allocations, and you can see why he is cynical. “The alternatives bucket tends to attract anything the marketing department thinks is new and bright and shiny,” he says. “But there are plenty of hedge funds that struggle to do better than cash.”
But then again, PHAROS’s portfolios – which start out with a base allocation of putting nothing in alternatives – currently have 10% of their money in these strategies, spread across three underlying managers. And they work. They deliver and they diversify. The conclusion: there are plenty of alternative investments that can cost you plenty for achieving very little. But if you’re picky, and understand clearly what you’re getting, then alternatives can work for you.
What is an alternative? The term is somewhat elastic, but generally includes hedge funds (which itself covers a broad church of strategies and approaches), private equity, infrastructure and commodities. Some think it includes real estate too, though we leave that aside in this article.
