Capabilities

Alternative investments

A changing investment environment is presenting new challenges. But alternatives remain as important as ever for investors seeking enhanced income, returns and diversification.

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At Invesco, we’ve been managing alternative solutions for almost 40 years. Today, our assets under management total $186 billion, managed by over 481 dedicated private markets professionals.*

 

Discover our comprehensive range of capabilities, spanning real estate, private credit and ETFs.

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Transcript

At Invesco, we’ve been managing alternative solutions for almost 40 years. But we know that yesterday’s thinking isn’t enough to meet today’s objectives. That’s why we’re injecting alternative thinking into the heart of the asset class. So, whether it’s direct real estate, listed real estate, or real estate debt… Whether it’s senior loans, direct lending, or distressed credit… We’ll partner with you across a range of alternative asset classes and approaches, bringing a fresh perspective, whatever your objectives.

You can go global with our diversified real estate capabilities… enhance your income with our senior loans range… or combine the art of investing with the power of mathematics, statistics and data science by working with our Solutions team.

Join us at the cutting edge of ESG, from our GRESB-rated properties to our specialised private credit framework, which builds ESG insights into an area where third-party data is sparse. Or, simplify the process of investing in the asset class with our flexible multi-manager platform which offers streamlined access to high quality assets across the alternatives spectrum.

Think alternatives? Think Invesco. 

Alternative investments at Invesco

Real estate

With ~ $90 bn in AUM, we’re one of the world’s largest real estate managers. Explore our real core, debt, higher-returning, listed, sector specific capabilities.

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Private credit

With a preference for senior secured debt, our capabilities include broadly syndicated loans, direct lending and distressed credit.

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Commodity ETFs

Commodities can help you diversify your portfolio and mitigate against the effects of inflation. Our ETF range can help you gain efficient access to an asset class that’s otherwise highly illiquid.

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Investment insights

Alternatives: The importance of diversification in today’s market

Transcript

Where do you see inflation and interest rates going?

So our expectation is that inflation is largely a rear-view mirror problem. In other words, the disinflationary trend is very much in place and we're going to see inflation continue to come down over time. The wheels have been set in motion by this aggressive tightening cycle. Now, having said that, different economies are in different places. The US started tightening early, as did Canada.

So it's in a more mature place in terms of its disinflationary process. But Europe is close behind and clearly the economy has been very, very resilient. But it is following the same trajectory as the US in terms of likely seeing an economic slowdown and, of course, seeing a moderation in inflation. So that gets us to the big question on rates.

And our expectation is that, first of all, the Fed is done. I do believe that what happened in early May, the FOMC meeting and its announcement, while confusing, represented a de facto conditional pause. Now, the Fed has said it wants to keep rates at this high level for a long time. But we could very well see, especially if this disinflationary trend is as strong as I suspect, that the Fed could certainly cut rates by the end of this year. Some kind of a maintenance cut.

As I said, Europe is a little further behind. So what we anticipate is that it's going to take longer to get to the terminal rate, but the terminal rate is going to be significantly lower than the terminal rate on the Fed funds. So we are getting to the end of the global tightening cycle. And I think that's important to recognise.

I think long rates are moving down and, at a certain point, we should see short rates start to follow in any environment. But certainly in an environment of uncertainty, it's important to have a well-diversified portfolio with some asset classes that have lower correlations to the main asset classes, the staples of portfolios like equities, like fixed income. And so I think this is a time in which investors may recognise more the benefits of diversification with alts in a portfolio.

How have alternatives performed over the last year in the face of so much market turbulence?

So if we think about 2022, that was such a difficult period for two major asset classes, equities and fixed income. Investors were disappointed. Many questions were asked on the part of clients about whether or not balanced portfolios make sense.

I think of 2022 as the kind of year in which investors recognised the benefits of alts. Having a diversified portfolio with alternatives exposure. Because they did exhibit a very different performance. They were a lower correlating asset class relative to equities and fixed income, and that was a year in which it really mattered. It helped smooth returns for those investors that did have exposure to alts. And again, to me, that's the kind of year in which investors can look and see the benefits of diversification with alternatives.

Now that interest rates are so much higher, is there still a case for alternatives?

Yes, absolutely. There is a case to be made for alts in any market environment. And I would suspect that, a year from now, the rates environment will be quite different than it is today. The market environment could be very different than it is today. What is enduring is the diversification benefits that investors can get through alts exposure.

So absolutely. Alternatives make sense.

What does a higher interest rate environment mean for real estate?

We have to recognise real estate has historically and still offers high absolute yields. And so I think it's still a very competitive investment option. I do think there's concern that higher rates environment is challenging for commercial real estate, especially since so many loans are anticipated to come due in the next several years. And there's concern they'd have to refinance at a significantly higher rate.

Although I will point out that I think that we could be in a very different rate environment next year and beyond. We're certainly seeing long rates already come down. It's also important to note that if asset classes like real estate come under pressure, that could represent opportunities as opposed to areas of concern. And finally, I think we need to understand that commercial real estate doesn't just apply to office space.

There is this is actually a very broad category that encompasses industrial warehouses, medical office space, dormitories, storage facilities. It's not just about office space. And so, while there are areas that could be challenged because of the environment (let's think about, in a post-pandemic world, less office usage – although I would argue that return to work policies are moving in the right direction for office space), there are other areas where there are some really compelling secular growth opportunities. So this is a time, in my opinion, to not shy away from real estate.

Now that public credit markets are offering higher levels of income, is there still as much of a case for private credit?

I think this is a compelling time for private credit. If you think about the Global Financial Crisis, 2008 to 2009, private credit held up well. It performed well relative to other asset classes. And that's because of the kind of features that it offered, like financial covenants that ensured prepayment that ensured a lot of features that were protective in nature.

And while I am not suggesting we are going into the Global Financial Crisis, absolutely not, I do think the economy is going to get worse before it gets better. And so this is this is a time in which the kind of financial covenants offered by private credit could be could be a very attractive feature for investors.

At Invesco, we also have a broad range of exchange-traded commodity products. How might these come into play, given your outlook?

Well, if you think about our outlook, our expectation in the short term is that we are going to experience significant headwinds that are going to exert pressure on risk assets. And, in that kind of environment, typically defensive positioning has worked. Part of defensive positioning tactically would be an overweight in gold. And so one could easily access that overweighting of gold exposure through ETFs.

Now back to our macro outlook. Our expectation is that those macro headwinds are likely to be relatively short-lived. That, at a certain point, we'll see clear and convincing evidence that that central banks are done tightening and markets will start to discount an economic recovery going forward.

And that would mark a distinct market regime shift to a more risk-on environment. So, for a tactical allocator, that would mean going into their commodities allocation and moving from an overweight to gold to an underweight, while at the same time moving to an overweight in oil, which is a cyclical commodity. One that that's closely tied to the economic cycle.

And so, for investors who are tactical allocators, ETFs and the access they provide to commodities can be very valuable in making those tactical calls.

Alternatives: The importance of diversification in today’s market

In the first episode of this new series, we’re joined by Kristina Hooper, our Chief Global Market Strategist.

Kristina discusses the outlook for inflation and interest rates, before sharing her thoughts on what this means for alternatives.

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Why Invesco for alternatives?

FAQs

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 $186 billion 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 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.

Traditionally, alternative assets (like real estate and some types of private credit) have been slower to buy or sell than public market assets (like equities and bonds). Often, this is because they are not traded on a screen with daily liquidity. Likewise, the market may be smaller with fewer eligible buyers and sellers, or the transaction may have to be privately arranged.

Liquid alternatives, on the other hand, can be bought or sold more frequently. Some fund structures (like ETFs) can help achieve greater liquidity. For example, Invesco offers a broad range of commodity ETFs with daily access.

Footnotes

  • *Source: as at 31 March 2023.

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and 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

  • Data is provided as at 31 March 2023, 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.

    EMEA2941623/2023