An asset class is generally defined as a group of assets that share similar characteristics. ‘Alts’, however, are grouped together not by their inherent similarities, but by the fact that they don’t fit neatly into what are considered the main or conventional asset classes of equities (shares), bonds and cash — ‘alts’ is simply an abbreviation of ‘alternatives’.
Some (but not all) of the investments that are included in the definition of alts are:
private equity, which simply refers to investing in a private (as opposed to public/listed) company
hedge funds, where a partnership of investors use their pooled funds to actively focus on generating higher returns than the benchmark, often through using derivatives and leverage (borrowing to invest)
multi-asset funds, which are what they sound like — funds that contain more than one asset class, say shares and cash
insurance-linked strategies, whose value is correlated to insurance-related risks (such as natural disasters) rather than the movement of financial markets
distressed debt investing, which is investing in the debt of a financially distressed (but otherwise successful) company or other entity
commodities.
Why invest in alts?
Alts are not commonly invested in by individuals (‘retail investors’) because they can be complex, risky and illiquid. Some alts offer investors a higher return and risk profile. Within a well-managed investment portfolio, their role is generally to provide diversification and balance overall portfolio risk.
NGS Super’s alternative investments
The table below shows the role that alts play in NGS’s pre-mixed investment options.
NGS’s alternative investments include some interesting private market assets that are designed to solve pressing health and environmental problems and create a positive impact, including:
Inari, pioneering seed technology for agriculture that will increase yields and reduce use of nitrogen and water
Vow, developing cultured meat that is delicious, nutritious and sustainable
Invaio, creating plant health solutions that are good for farmer, society and the environment
