A glance at our databases reveals the folks at Premier Miton have a stout overweight to alternative assets in their balanced portfolio, so we thought it prudent to find out what alternative investments means to them.
Premier Miton’s alternative’s exposure stands at 9 per cent, compared with 6 per cent for the average.
David Thornton, part of the company’s multi-asset team, told Asset Allocator he has a very specific definition of what constitutes an alternative and what doesn’t.
He says many investors had become too complacent about the capacity for the 60/40 portfolio to be diversified, and the relative failure of that strategy in recent years has forced allocators to go deep into the weeds of macroeconomics when putting portfolios together.
Thornton believes alternatives can allow an investor to avoid the perils of central bank policy.
He primarily views alternatives role as being to diversify equity volatility.
With that in mind, two of the areas of alternative investments he is shunning are private equity and debt products, along with long/short equity funds that tend to be net long equities and therefore not a diversifier away from that asset class.
So what is in the alternatives bucket at Premier Miton?
Thornton said: “We believe that commodities exposure, infrastructure, real estate and market neutral long/short equity or credit funds can all be useful portfolio diversifiers in the long run.
“Equity volatility displays a genuine negative correlation to equity performance but can be expensive to own in its purest form. There are a number of volatility strategies available that offer the investor the opportunity to benefit from spikes in volatility without the cost of the protection outweighing the benefit.”
