Northern wealth managers not buying into illiquids hype

Woodford suspension could cause investors to rethink illiquids

More than half of fund selectors at Portfolio Adviser’s Northern Congress say they are not interested in illiquid investment strategies.

A poll conducted among delegates during the opening session of the conference, chaired by Last Word editorial director Dylan Emery, found 52% of fund selectors from the north of England are shunning illiquid assets such as private equity, infrastructure and private debt in their portfolios.

Of those interested in illiquid strategies, 30% said they already actively use them while 9% said they are actively looking to put ‘significant AUM’ into them, and 9% said they want to use them but their clients won’t allow it.

All of those fund selectors (100%) who are active users of illiquids said they are looking to put money into infrastructure and 54% are considering further allocations to direct property. Only 23% are expecting to allocate to private equity and even less (15%) to private debt.

Fund selectors were also asked which vehicle they prefer for accessing illiquid assets. The most popular was closed-ended funds with 75% of respondents, followed by open-ended funds with 50%.

A further 50% said they like a fund of funds approach for illiquid assets while 8% said they prefer to be part of a consortium of investors and 8% like a direct deal with a manager.

This poll comes in the same week that open-ended funds and liquidity have been thrust into the spotlight after the Woodford Equity Income fund, run by renowned UK fund manager Neil Woodford, was suspended after a series of heavy outflows made it difficult for the manager to sell down controversial illiquid names in the portfolio.

Certain open-ended property funds faced similar issues when they were forced to gate following the Brexit referendum.

Fund groups have been actively pushing illiquid and private assets into the intermediary space that purport to offer inflation linked returns that are uncorrelated to equities and bonds in the current market environment.

Last month, Schroders announced Peter Arnold had joined as head of distribution for private assets in follow up to its appointment earlier in the year of Georg Wunderlin as global head of private assets.

Earlier this year, Hermes Investment Management added private debt expertise to its fixed income team. In November last year M&G unveiled a Credit Income Investment Trust, aimed at the wholesale market, which invests in a diversified portfolio of public and private debt.

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