Perpetual Private has warned that the current bull run in equities markets has been a magnet for people who believe cheaper is better.
The S&P 500 index has recorded the longest bull run on record and the benchmark for US equities has risen more than fourfold since March 2009.
Perpetual Private’s head of investments research Kyle Lidbury said that the good run could not last.
“The more intelligent investors are actually saying ‘we know that this run isn't sustainable’. They are starting to understand that this strong run is not going to go forever. There will be a correction at some point in time,” he said.
Mr Lidbury said that many people were ignoring alternative assets due to the difficulties in accessing them.
“The general environment at the moment is that cheaper is better. We don’t believe that, we are a strong believer in net returns,” he said.
Traditionally, alternative assets had been difficult for investors to get into and that was impacting the diversification of portfolios, said Mr Lidbury.
“The reason you don’t see these types of assets widely available is because there are these other hurdles people need to get over, which is illiquidity and the cost,” he said.
Perpetual Private developed the perpetual income opportunities fund and the growth opportunities fund to allow people to access these alternative assets, said Mr Lidbury.
“Many high-net-worth clients appreciate the role these funds can play as part of a diversified portfolio, which are recommended as part of a comprehensive professional financial plan,” he said.
The challenge was finding the right investment for the client, but diversifying was important to a strong investment, said Mr Lidbury.
“I don't think we have found anything better than equities, but the problem with that is it comes with a lot of volatility so what we do is we diversify that risk by having these types of assets,” he said.
Perpetual’s funds were established a decade ago due to a need in the market and Mr Lidbury said the need for them had again been shown recently.
“At the moment, we are now seeing somewhat of a similar environment to when we as a business identified the need for these types of funds. We’ve had such a good strong run in equity markets and people are starting to understand the valuation challenges we have,” he said.
Ultimately, these funds are for long term-investors, but it was a good way to diversify the portfolio, said Mr Lidbury.
“You need to understand, if you are investing here, you need to be investing for the long term. We believe they are really good exposures and we have a lot of conviction recommending them to clients,” he said.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]