PE boosted by investors searching for alternatives

Oksana Patron

8 February 2023

The interest among investors in alternative investments keeps private equity (PE) funds shining as it has potential to offer a safe harbour against an anaemic outlook for global growth, according to alternatives investment manager Federation Asset Management.

One of the key advantages of the PE funds is that, apart from their lower volatility and correlation with listed equities of PE funds, they also offer a deeper pool of companies which are often more innovative and productive compared with their listed counterparts.

“The current volatile investment climate is tailor made for private equity funds due to lower volatility and low correlation compared with listed equities, more investment options and higher investment returns,” Cameron Brownjohn, chief executive of Federation, said.

“It’s a view that we share with one of Australia’s foremost institutional investors, the Future Fund, which has 37% of its $193 billion invested in private equities and alternative investments – its largest allocation of any asset class.”

Recently-launched Federation’s Alternative Investments II (F2) has invested in renewable energy generation activities, renewable energy storage activities, sustainable and social infrastructure and property investments offering “a significant economic and social outcome”.

The fund, which says that its strong focus on environmental, social, governance (ESG) investments had helped deliver positive performance, uses negative screens to exclude investments in companies that are materially involved in fossil fuels, gambling, tobacco and alcohol, armaments, live animal export and old growth logging.