Article

Alternative opportunities Q4 2024

21 October 2024
Jeffrey Bennett
Jeffrey Bennett
Senior Portfolio Manager and Head of Manager Selection
alternative opportunities quarterly outlook

Key takeaways from this edition

Portfolio risk

We remain neutral on how we’re allocating risk within our alternatives portfolio due to elevated downside growth risks, high equity valuations, and benign capital markets activity. In general, we’re more defensive, favouring private debt and hedged strategies versus private equity.

Private credit

While we may see some compression in direct lending spreads and original issue discounts (OID), we still believe that all-in yields will remain attractive relative to liquid credit strategies.

Real asset and alternative credit yields continue to remain elevated relative to their long-term averages.

Private equity

Dry powder continues to sit idle as public market valuations remain high, and “take-private” transactions are at record low levels. Lower interest rates and tighter spreads will likely improve the leveraged buyout (LBO) outlook as the thawing of the exit market will be a welcome shift for PE managers and investors.

Real assets

Within commercial real estate, a trough in valuations and stabilisation of cap rates at tight levels have driven confidence that the start of a new transaction cycle is close at hand. Despite elevated valuations and record levels of dry powder in infrastructure, an easing of policy may provide a runway for investors to deploy capital.

Hedge funds

Spreads within event-driven strategies remain high despite limited capital market activity from mergers and acquisitions as private equity remains sidelined.

Trend-following strategies have historically benefited from a tailwind during periods of high and declining rates.

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Frequently asked questions

A broad range of investments fall into the ‘alternatives’ asset class, including real estate, private credit, private equity, infrastructure and hedge funds. The asset class is growing, as investors continue to turn to alternatives for diversification and to navigate challenging market conditions.

Alternative assets often behave differently to public market assets like equities and bonds. Their unique characteristics mean that they can help investors achieve a diversified portfolio. Typically, they also generate higher returns than public market assets. 

We manage over $177 billion (as of 30 September 2023) in alternative strategies, spanning private credit, real estate, private equity and beyond. We share some highlights below:

  • Real estate: Invesco Real Estate is a global real estate manager, with local people on the ground in 21 offices worldwide. We invest across the risk-return spectrum, from core to higher returning strategies. Our expertise covers public, private, equity and debt capabilities.

  • Private credit: Invesco Private Credit is one of the world’s largest and longest-tenured private credit managers. We pursue opportunities across broadly syndicated loans, direct lending, distressed debt and special situations.

  • Private markets platform: Invesco Investment Solutions offers a private markets platform, which streamlines the process of investing in alternative assets. Alongside Invesco’s in-house capabilities, it provides access to partner firms with expertise in private equity, private credit, real estate and infrastructure.

Related insights

  • Investment risks

    The value of investments and any income will fluctuate. This may partly be the result of exchange rate fluctuations. Investors may not get back the full amount invested.

    Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices  that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.

    Important information

    All data is provided in USD and as of 19 September 2024 sourced from Invesco unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Views and opinions are based on current market conditions and are subject to change.

    Israel: This document may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent. Nothing in this document should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“Investment Advice Law”). Neither Invesco Ltd. nor its subsidiaries are licensed under the Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder. 

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