Investors have access to a continually growing number of options in alternative investments and should consider them for their portfolios, according to an asset manager at J.P. Morgan Asset Management.
“If you want access to certain parts of the economy, you’re going to have to own alternatives," Anton Pil, global head of alternatives for J.P. Morgan Asset Management, said in an interview with Financial Advisor.
For example, he said that because companies are electing to not participate in IPOs until much later in their development, investors who want access to young, fast-growing companies must do it through a private transaction. Other traditional investments are now more accessible through private channels, including debt, infrastructure, transportation and forestry, Pil explained.
“As these asset classes continue to grow, they’re beginning to rival some public market asset classes in size,” he said.
Alternatives also provide diversity at a time when equities and fixed-income investments are more correlated than in the past.
He said alternatives address "diversification and volatility of an asset allocation, not just trying to get higher returns."
Pil believes alternatives are moving towards being a part of the traditional 60/40 portfolio.
“I think that the 60/40 portfolio is going to eventually morph into something that’s probably more like 50/30/20 and eventually maybe even further,” he said.
Such a model would remove 10% from the equities allocation and place it with higher returning alternatives and take 10% from fixed income and put it toward income-generating alternatives, Pil said.