“As tends to be the case across all markets there is a correlation between risk and return (and volatility) and as such the safer end of the AI market tends to be oriented around the more mainstream investment markets,” says Brett Williams, managing partner of Old Burlington Investments.
“Typically they have lower expected returns as well as lower risk.”
Mr Williams suggests safer investments might, for example, be underpinned by assets, exceptional counterparties, or reliable low-risk cash flows. An example of this, he says, would be UK solar energy sites, where revenues are underpinned by a 20 year government tariff scheme (the Renewables Obligation Scheme) and electricity sales tend to be made to energy companies with very good credit ratings.
“That, combined with their low maintenance requirements, and excellent cash flows mean that, although long term rates of return might be as low as 6%, they are nonetheless regarded as one of the lowest risk AIs available.
Adrian Lowcock, senior research analyst at Hargreaves Lansdown,
“For investment purposes they tend to be for the high net worth as alternative investments are one of the last areas to cover off in a portfolio. People with a specific interest who, for example, have bought pieces of art work and treat it as an investment to be appreciated don’t necessarily consider the item part of their investments although it my have significant value.