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| | Celebrating the strength in infrastructure and renewables Stubborn inflation rates mean the Bank of England will keep interest rates at 5 per cent with cuts not expected before November.
CPI stood at 2.2 per cent -above the target 2 per cent but below the BoE’s forecast of 2.4 per cent – which forces the central bank to slow the pace of interest rate cuts.
Good news for savers, at least for now, but for those asset managers offering alternatives to fixed income, the picture is less positive especially those targeting retail investors.
This week we bring you news that Gravis Capital, a specialist long income manager offering infrastructure, renewable energy and property funds, is targeting institutional investors as a source of ‘stickier’ capital after its retail market began to shrink.
Philip Kent, Gravis CEO, tells us that retail investors are taking advantage of the higher rates from traditional bonds and choosing to derisk portfolios by moving out of private markets.
Fortunately for Gravis this trend has coincided with government efforts to encourage institutional assets particularly pension funds into the UK’s infrastructure, renewable energy and social housing projects.
Kent says: "Institutions tend to be stickier in their allocations. In contrast, for wealth and retail investors, infrastructure or renewables are typically used as an alternative source of income. If they can get the same returns from a bond, they will likely turn to those just in terms of lower risk or for simplicity."
As part of its efforts to access the UK’s defined contribution (DC) schemes, Gravis is exploring the long-term asset fund (LTAF) which makes it easier for investors to access private markets.
Research from the DC Investment Forum finds that 61 per cent of DC schemes and master trusts favour LTAFs as the route to illiquid assets, with one scheme saying: "Asset managers need to create more funds, and LTAFs are a great opportunity; the industry needs a mixture of different asset allocation and a simple way to work on a platform."
DCIF predicts a surge in the number of LTAFs coming to market which will be a positive development for investors seeking to participate in the growth potential from UK private markets.
However, LTAFs are still relatively new – they were authorised in 2021 – and there will be something of a learning curve for investors and providers. As ever, it will be necessary to proceed with caution.
Here’s your weekly reminder to nominate your favourite service provider in the Institutional Asset Manager awards for 2024. Follow this link to place your votes.
We are also pleased to bring you a discount for a London-based responsible investment conference. This code, ETF20, will gain you a 20 per cent discount on tickets to attend RAO Global’s symposium on 21st November in London.
Gill Wadsworth, Editor, Institutional Asset Manager
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| | | | | | | | | | Focus on green transition supports growth | | When your target market is retail investors seeking an alternative source of fixed income in a world where traditional bonds offer little in the way of return – as was the case post global financial crisis – the hikes in interest rates since 2021 brought unwelcome change. |
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