What's Happening In Alternatives?

The completion of the first quarter 2022, has shown a continuation of increasing numbers of private investors participating in alternatives.  March particularly was a busy month, with iPartners completing a number of deals across a range of assets.  

We closed a corporate loan for a growing non-bank lender which was very well received by investors.  With a 9% per annum return payable monthly for a debt exposure to the private company, investors recognised the uniqueness of the credit opportunity.

We have also been active in real estate debt opportunities, gathering investor interest for a senior land loan for a new housing estate in north-west Melbourne.  The opportunity to take on the role of the bank, lending to high quality development that brings affordable housing to families provides a sound investor risk-reward. And in the last week of March, we closed out a debt capital facility for a business which is on-lending to start ups across Australia, filtered by the fact they are already proving they have solid and consistent monthly revenues.  Whilst our investor capital is being lent in that deal to smaller emerging businesses, we liked the deal in terms of the credit risks that our capital is being exposed, in terms of the very strict filtering criteria being applied to each deal as well very defined minimum equity buffers underneath our exposures supporting each transaction.     

What are volumes like in the alternatives sector?

Volumes have continued to increase.  We have noted before early on this year, how we were seeing the higher volatility in listed markets driving greater weightings towards alternatives and that is now being reflected in terms of volume growth across our alternatives platform.  Our platform now has close to $2 billion invested on behalf of private wholesale classified investors across its widely diversified range of assets.  This has essentially grown from just under $1 billion about this time last year.  

At the individual investor level, we are seeing quite a wide range of sizing of each individual investments, which speaks to the ability to allow each investor to size in line with their comfort preferences.

How are investors dealing with liquidity in alternatives?

The greater the size of deals as well as the greater number of individual investors participating, is essentially adding a secondary market of liquidity.  Whilst most investors in alternatives understand the best outcomes come from holding the asset to its defined maturity date, we have however seen some investors taking advantage of our platform capabilities to sell assets in the secondary market to other investors who are seeking to take on that exposure.  So whilst alternatives are essentially unlisted investments, as in not listed on a stock exchange, the sector does have secondary liquidity which is increasing as the number of private household investors continues to increase.  

Are investors selecting each deal individually or are they taking a pooled managed approach to alternatives?

It is both depending on the individual.  Those that are very self-directed and are happy to consider each individual asset opportunity on a deal by deal basis, tend to be doing exactly that whereby they pick and choose across the private debt, private equity and real estate opportunities when they become available. Whereas those that prefer to have a more passive approach, tend to gravitate towards our funds where they are comfortable for the diversified pool of assets to be professionally managed across the sub sectors being private credit, private equity, agricultural exposures and real estate opportunities.