Escala dives further into “fertile ground” of alternatives

Alternative investments have cemented their position in portfolios, according to sophisticated investor advisory firm, Escala Partners, as appetite for diversification continues to grow exponentially.

This comes as the firm confirms that its allocation to alternatives, measured by tracking its approved product list (APL) by funds under management (FUM), has surged from 14 per cent to 35 per cent in the last three years.

Stephen Dickinson, Alternatives Investment Analyst at Escala, said alternatives have become much more sought after following structural changes in capital markets and investors searching for diverse avenues to generate solid returns.

“As the range of private market strategies continue to expand, we see this factor as fertile ground for diversifying our client portfolios,” he said.

“We see alternatives not just as a complement, but as a core part of a diversified portfolio. As long as clients can accommodate the illiquidity, the potential for superior risk-adjusted returns is significant.”

Despite a traditionally ‘high-risk’ reputation, Dickinson said several types of alternative investments can play an important role in investors’ portfolios in protecting from public market drawdowns – like private markets – and acting as inflation hedges – like real assets and digital assets.

Escala’s range of alternative investments on offer includes private equity, private credit, venture capital, infrastructure, property, royalties, digital assets, art and collectibles.

“Including private assets in our portfolio mix expands the investable universe. It gives investors access to a broader range of sectors, geographies and companies, many of which aren’t available in public markets,” he said.

“We have observed an increasing demand for global diversification, with our clients seeking access to sophisticated, overseas private market strategies. Evergreen fund structures offering continual capital raising without fixed term limits have resonated particularly well with our clients seeking smoother deployment and redemption mechanics.

“We don’t view these as risky investments per se. The key is matching them to the client’s liquidity needs and investment horizon.

“Ultimately, our approach is about being strategic to deliver superior returns to our clients. Private markets offer tremendous opportunity, but the key is thoughtful portfolio construction and alignment with our client long term wealth building goals.”