According to an Ortec Finance survey, more than 80 per cent of advisors plan to increase their private equity and private debt allocations in the next two years.HAKINMHAN/iStockPhoto / Getty Images
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More advisors are turning to alternative investments to improve clients’ portfolio performance, according to a recent Ortec Finance survey of wealth managers and financial advisors from five European countries and Canada.
Neil Greenbaum, executive vice-president of sales and partnerships, North America, for Ortec Finance, a technology and risk management company based in Rotterdam, the Netherlands, notes that 81 per cent of advisors say their clients have been investing in a wider range of asset classes over the past year. Many traditionally had a home bias and saw alternatives as a way to branch out and add more international exposure.
Globe Advisor spoke recently with Mr. Greenbaum about the alternative landscape.
Alts have been around for some time. What’s different today?
At first, advisors were searching for more yield in a tough, lower interest rate environment. Within a diversified portfolio, you traditionally saw asset allocation based on market caps and investment style, or value versus growth. But now they’re looking to add another dimension to portfolios. They’re trying to expand the meaning of what it means to diversify. As alts perform independently to the equity markets, they can be a natural way to diversify in a portfolio.
The other big factor is that the industry itself has made it much easier to get into the alternative asset space. There’s a proliferation of products available. These investments used to be reserved for high-net-worth investors. Now, everyone can participate in some way, shape or form.
What do some advisors and clients struggle to understand about alts?
They need to think about balancing liquidity. Our survey found that more advisors plan to increase their private equity (83 per cent) and private debt (85 per cent) allocations in portfolios in the next two years. These are the two most popular alternative investments right now. But while they may have attractive returns and yields, you can’t cash out of those investments right away like a stock. Sometimes, they have hold periods, lock-ins and other things. Advisors and clients need to look at the fine details.
Where do alts go from here?
Although it wasn’t part of our research, I think there are going to be alternatives that will focus on the artificial intelligence (AI) space. There’s been a whole wave of AI machine learning and we’ve seen certain individual stocks take off, and I think that is going to morph into alternatives finding a way to participate.
– Deanne Gage, Globe Advisor reporter
This interview has been edited and condensed.
Must-reads from Globe Advisor this week
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How investors are responding after rule changes to HISA ETFs
High-interest savings account (HISA) ETFs are having a tough go after a regulatory change that took effect in January, competition from new money market ETFs and hot equity markets. The rule change by the Office of the Superintendent of Financial Institutions led to lower yields on HISA ETFs, which invest mainly in interest deposit accounts held by Canada’s big banks. Some of the ETFs have adjusted to the new regulatory environment by adding other investments to boost yield. “The [asset] managers are trying to stay competitive by mixing deposits with money market instruments,” says Daniel Straus at National Bank of Canada Financial Markets. Gillian Livingston reports.
Also see:
‘Selectively retired’ is how this former insurance executive describes his post-career life
Why this money manager is shoring up cash and buying into commodities, genomics and Mexico
How to prepare for audits over home office expenses
An important cross-border tax-filing deadline is approaching. Here’s what you need to know
How liquid alternatives fit into fixed income allocations
What you and your clients need to know
What to know about the capital-gains changes, from estates to pre-empting your tax bill
The main takeaway for taxpayers from the government’s new guidance on changes to the taxes on capital gains is that Ottawa is sticking to what it had outlined in April’s federal budget, experts say. In a notice of ways and means tabled on Monday, the government offered more details about how it proposes to apply the new rules, including the handling of trusts and whether individuals would be able to trigger capital gains without selling pre-emptively. But there were few concessions to critics who had sought changes ranging from carveouts to a longer implementation timeline. Erica Alini reports.
National Bank offers to buy Canadian Western Bank in deal valued at $5-billion
National Bank of Canada is buying Canadian Western Bank (CWB) in a pending deal that extends the reach of the country’s sixth-largest lender into Alberta and British Columbia. The Montreal bank said Tuesday it struck a stock-swap deal that values Edmonton-based CWB at $5-billion. National Bank has been on a tear in recent years, with its share price surging 89 per cent in the past five years – making it the best-performing Big Six bank stock – as it focused on expanding its business beyond Quebec and growing niche areas where it believed it could grow. Stefanie Marotta reports.
Toronto’s Anson Funds reaches settlement with U.S. regulator over short-selling practices
Anson Advisors Inc. will pay US$2.25-million after U.S. securities regulators sanctioned and fined the Toronto-based money manager for failing to tell its investors how it was working with activist short sellers. The Securities and Exchange Commission (SEC) struck the settlement with Anson over activities from the fall of 2018. As is customary in SEC settlements, Anson neither admitted nor denied the allegations in the SEC complaint. David Milstead reports.
– Globe Advisor Staff
