The genuine alternatives he talks of with a store of resilience include some absolute return funds, and property whose tenants are not affected by the economic cycle, for example student accommodation and GP surgeries (via MedicX and PHP).
“Some of the mature private equity plays look interesting, particularly as you can buy these at a discount to NAV at a point where they are realising value, such as Pantheon International and HGCapital,” he adds.
“Also, in infrastructure we own HICL, IPP and The Renewables Infrastructure Group (TRIG). We are diversifying our underlying revenue flows as much as possible.”
With this in mind, it promises to be an interesting year for absolute return strategies, many of which are now reaching maturity and in some cases running out of excuses for poor performance.
Kepler’s Absolute Hedge research reports that only two of its strategy indices of fund performance were able to post positive gains in 2016 – multi-asset and credit.
“Despite this, there have been some notable successes at the underlying fund level, with strong performance and asset growth,” says head of research Georg Reutter.
Interestingly, he suggests it is the more defensive strategies that are attracting the biggest inflows.
“We continue to see strong demand for market neutral strategies which is reflected in a gain of £0.8bn over the final quarter of 2016,” he says.
“Equity long/short saw the largest decline in assets with AuM now at £46.2bn, down £2.6bn in the fourth quarter.”
