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The Case for Alternative Investments

By Nersan Naidoo, 25 April 2019

Long term investors are increasingly including alternative assets in their portfolios to diversify and enhance long term returns. We anticipate lower returns from traditional asset classes over the medium to long term.

Asset consultants and retirement fund trustees are faced with a significant challenge. Traditional asset classes are no longer yielding the levels of returns to which they have become accustomed. From a portfolio construction perspective, there is increasing pressure to find new sources of return to meet required outcomes.

Alternative investments offer powerful risk-adjusted returns

The nature of alternative or (typically unlisted) ‘private market’ investments is that they tend to have lock-in periods and are intended to be held for the long term. To compensate investors for this illiquidity, the assets offer the potential for higher returns than their more liquid counterparts. Investors such as retirement funds and insurance companies with long term liabilities (and therefore long term investment horizons) benefit significantly from the illiquidity premium, investment flexibility, lower volatility and therefore powerful risk-adjusted returns that characterise alternative investment opportunities.

Our presence, relationships, partnerships, and understanding of Africa offer opportunities

Africa rewards patient long term investors with uncorrelated investment returns and offers many diversification opportunities both within and across asset classes. As a business, Sanlam has come to appreciate the vast benefits and strong long term returns that are available from African investment opportunities and remains committed to investing across the continent. We have slowly and steadily built the largest non-banking financial services footprint in Africa. We encourage you to invest with us to access the tremendous opportunities that our presence, strategic partnerships, strong network, and stringent governance and risk management processes provide.

‘When managed within a clearly articulated framework, alternatives offer significant upside potential and are likely to become a strong and growing element of retirement fund, insurance company and other long term investor portfolios over the next decade.’

Sanlam Life Insurance is a licensed financial service provider.
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