Study: Investors rely on private equity and alternative assets
Financial markets are currently undergoing a period of significant change. Digitalization, demographic change, globalization and international trouble spots have changed market structures and investor behavior. This development affects, for example, financial instruments and the composition of market players. With the spread of electronic platforms, for example, the importance of traditional merchant banks declined. At the same time, investors are increasingly entering the market directly and are interested in a wide range of asset classes. Because portfolio diversification is particularly important in times of economic policy uncertainty in order to avoid cluster risks. The focus is on private equity and alternative investments, as a recent study has found.
Diversification strategy 2024: these asset classes are in demand
One Survey by independent research firm PureProfile on behalf of Ortec Finance, a global provider of risk and return management solutions for professional investors, underlines this trend. 100 asset managers and financial advisors from Great Britain, Canada, Italy, the Netherlands, Germany and Switzerland were interviewed, whose organizations together manage assets worth the equivalent of 1.4 trillion euros for clients. It is clear that the allocation to various asset classes has changed noticeably, with alternative investments such as private equity and private debt becoming increasingly prominent.
To the Main findings of the survey Count:
- diversification trend
An overwhelming majority of more than four out of five (81 percent) of the surveyed asset managers and financial advisors report that their clients have invested in a wider range of asset classes than usual in the past year. - International portfolios
97 percent of advisors say that their clients are increasingly building up international and diversified portfolios. 87 percent expect this trend to continue over the next three years. - Increase in alternative assets
91 percent of advisors have increased the share of alternative investments in their clients' portfolios. The main reasons for this are the strong performance (71 percent), the growing range of funds (53 percent), attractive returns and the low correlation to equities (50 percent).
The study by Ortec Finance also shows that private equity and private debt saw the biggest increases in the past year, and other alternative asset classes were also able to gain in importance. A further sharp increase in investments in private debt and private equity is expected over the next two years.
One TIME Investments survey Among 200 British financial advisors and investment experts also underlines the growing importance of alternative investments. 96 percent of respondents say that their clients have already invested in alternative assets such as private equity, hedge funds and infrastructure. 78 percent expect this allocation to continue to increase over the next twelve months. However, the choice of investment strategy, limited knowledge of the market and the lack of experienced fund managers remain challenges.
In any case, both studies reflect the growing interest in high-yield and less correlated forms of investment, which continues to spur the trend towards diversification.
What are alternative investments?
But what actually counts as alternative assets? Alternative investments include a variety of investment options outside traditional asset classes such as fixed-term deposits, stocks or bonds. These include hedge funds, private equity, real estate, infrastructure and even collectibles such as fine wine, classic cars and art. These investments generally offer a lower correlation to traditional markets and may have higher returns but also risks such as lower liquidity. They are increasingly popular with institutional and private investors as they offer return opportunities and diversification opportunities and can balance the overall portfolio.
How can private investors invest in alternative assets and private equity?
However, alternative investments have so far been mostly used by institutional investors. Since platforms such as FINEXITY “tokenize” alternative investments, i.e. split them into digital shares that are liquid and tradable from 500 euros, retail investors can now also meaningfully diversify their portfolio. In addition to real estate and collectibles, the FINEXITY marketplace also offers infrastructure projects, citizen participation and corporate investments. The latter asset class comprises direct and indirect corporate investments — in the form of private equity, private debt or venture capital.
Technically speaking, FINEXITY uses for tokenization Security Token, which have the same or similar rights as “classic” securities. Securities-like rights are membership rights or debt claims with asset content, similar to shares and debt securities.
The bottom line is that private investors can also benefit from the return and diversification opportunities offered by alternative assets, which institutional investors are increasingly demanding. Thanks to digitized shares from FINEXITY, the portfolio can be broadly diversified. Investors also have an overview of their investment at any time via their dashboard and can access transparent market data. If they want to sell their investment again later, the digital shares can be offered free of charge via the secondary market at any time. In this way, trading in alternative investments is just as easy and low-threshold as trading in stocks or other securities.
