In the current market environment, the demand for both infrastructure and renewables has been particularly strong given their exposure to relatively stable, economically insensitive, inflation-protected cash flows. These assets have the potential to generate low volatility, consistent growth of cash flows and returns that are uncorrelated with other asset classes, resulting in very attractive diversification benefits for investors.
Creating the right balance
However, while alternative investments offer many advantages to the income investor, there are also risks to be aware of. For many of these, particularly infrastructure, renewables and property, the fact they are ‘real assets’ also makes them relatively illiquid, meaning it is harder to sell the assets quickly without losing some value. Whilst the investment trust wrapper can provide access in a more liquid form, they come with their own complexities with share prices able to diverge from underlying asset valuations, known as a discount or premium to the net asset value. It is therefore important to understand the drivers of this.
The continuing evolution of markets means new avenues are constantly opening up for the savvy investor to find new income opportunities, but as the saying goes, if it sounds too good to be true, it probably is, unless you’ve done your homework properly.
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This communication is issued by Quilter Investors Limited ("Quilter Investors"), Millennium Bridge House, 2 Lambeth Hill, London, England, EC4V 4AJ. Quilter Investors is registered in England and Wales (number: 04227837) and is authorised and regulated by the Financial Conduct Authority (FRN: 208543).
For further information and to access the KIID and prospectus for the Quilter Investors Monthly Income and Quilter Investors Monthly Income and Growth Portfolios, please visit the Quilter Investors website.