Talking Point  

Higher inflation likely to boost appeal of alternative assets

Higher inflation likely to boost appeal of alternative assets

The prospect of significantly higher inflation in the UK means now may be the right time to own alternative assets such as gold and absolute return funds, according to Ben Seager-Scott, head of multi-asset funds at Tilney. 

Seager-Scott said that while there was no standard definition of what constitutes  “alternative assets”, the problems faced by both equities and bonds in the current climate mean investors should look at other options. 

He told FTAdviser: “Alternative assets is such a broad term that it’s difficult to generalise, but they are often worthy of consideration either on the specific merits of a particular sub-category, or when there are challenges in the broader mainstream asset classes that make alternatives perhaps relatively attractive.”

He believes the fixed income segment of client portfolios could be the part which is partly replaced by alternative assets, as rising inflation erodes the real value of the income garnered from bonds. 

Seager-Scott said: “The outlook for equities is still pretty attractive in the medium-term, but given most portfolios need to be diversified across multiple asset classes, I think the relative unattractiveness of fixed income broadly in an environment where inflation and real rates are providing headwinds, I think there can certainly be attraction in selected alternative asset classes.

"In particular, I’m still happy holding gold (physical, using an ETC) as well as the investment strategies embodied in various absolute return vehicles.”