Alternative investments attract major investors

More and more investors are turning to alternative investments for better risk-adjusted returns. Private debt in particular has been gaining in popularity in recent years.

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The current market environment can be considered challenging from the perspective of traditional fixed income and equity investing, and for example the expected yields on government bonds for the near future are hovering around zero. For that reason, an increasing number of major investors are nowadays seeking a higher return in relation to risk with alternative investments. Alternative investments generally refer to markets outside of the traditional, listed fixed income and equity markets, for example, real estate investments, infrastructure projects, various loan investments and private equity funds.

Growing interest in private debt in the Nordic countries

Interest in alternatives among major Nordic investors has continued to grow in recent years, and private debt in particular, i.e. direct loans given to companies by investors, is on the radar of an increasingly large group of investors. Private debt investments are not as easy to sell as, say, equities, but in the long run, they are an interesting addition to many an investor’s portfolio thanks to their return expectations.

“As an asset class, private debt has firmly established its position as part of institutional investors’ investment plans over the past three years. Large institutional investors are interested especially in continuous private debt programmes, where year after year they can stick with an investment programme that has proved to work for them and are not forced to constantly be on the lookout for new short-term partners,” stresses Taneli Törmänen, Head of Institutional Sales at Mandatum Life.

Demand for other types of alternative investments has also remained strong. “Even though the market situation has been uncertain in recent months, we are seeing growing demand in a number of alternatives. We are still finding investments with attractive return potential in the markets, for example, in private debt and in certain carefully selected real estate investments, whose returns can be improved through better real estate management,” explains Mandatum Life’s Director of Alternatives, Jussi Tanninen.

“If the investor can be flexible with liquidity and is prepared to commit to a long-term investment horizon, alternatives continue to be an appealing option,” he adds.