Asset Allocator recently took a road trip to Edinburgh and one of our stops along the way was to chat with Aegon Asset Management’s chief investment officer Stephen Jones.
Jones was happy to chat about one of Asset Allocator’s favourite topics, the outlook for alternative investments.
While Jones has no dog in that fight, since Aegon have many funds investing in the conventional asset classes, he thinks many of the alternative products available to wealth managers are here to stay, despite the changed interest rate environment.
He says areas such as private debt and private equity have been popular with US allocators for decades, “and are only really coming to the UK now, but I think they are here to stay, capital is being deployed to these products and they offer different opportunities for clients. I think the key is that those areas were not just growing because of lower rates.”
Jones is also relatively optimistic on the prospects for infrastructure trusts, saying “they are more able to withstand higher rates, in the same way that private equity trusts are. They have to write down the value of their unquoted holdings, and that has created a lot of pessimism in the market, but even during the period of uncertainty, many of these things have made very large distributions to investors, that shows the robustness of these assets.”
On the point of the general outlook for markets, he says: “The one thing we can be sure of right now is that interest rates are not going up, and so that should be central to how portfolios are constructed. Equity returns have been good but really from here what should be happening is that more parts of the equity market will begin to deliver decent returns, with smaller companies in particular likely to benefit.”
