There is always an alternative
It can be difficult for financial advisers to find a sufficiently diversified fund solution that offers clients the potential for attractive, equity-like returns with lower volatility.
We believe this requires different investment approaches throughout the market cycle. In order to achieve this, the Credo Dynamic Fund benefits from the flexibility to invest across a broad set of different asset classes.
Equity markets can turn in either direction on news, a tweet or sentiment and thus can be volatile in the short term.
In fixed income, with credit spreads tight and interest rates low, combined with the potential political risks, it can prove difficult to achieve meaningful returns over the longer term without taking excessive credit risk.
This does not mean that we cannot garner strong returns from these asset classes. Indeed, we have found pockets of value and interesting special opportunities within both fixed income and equities.
However, in response to the challenging climate, we have been casting our net wider and considering a broader range of investments. Our current weighting to Alternatives stands at 15% of the portfolio (as of 1st August 2019). These investments often offer all the diversification benefits to traditional asset classes as well as the potential for compelling returns.
The investment owns rights from a portfolio of songs, earning over 5% dividend yield for investors. The income is particularly attractive when combined with the potential for growth through the tailwind of streaming revenues.
These are instruments which help companies to finance the acquisition of key assets through asset leasing. The investment rationale boils down to the combination of a high prospective return and underlying asset value as a security.
These investments own income rights from a portfolio of assets that sell renewable power (e.g. solar or wind) into the national infrastructure, with long-term, stable incomes. The UK has been significantly increasing the proportion of energy produced from these sources to around 33% as part of a wider global movement. These investments help to fund this long-term development.
These alternative investment strategies are diverse and offer enticing returns as well as good liquidity. This allows the Credo Dynamic Fund to remain flexible and nimble as we seek out the best investment opportunities for our investors.