Alternatives   |   Aug 5, 2020

Exploring Non-Traditional Income – Part I

In Part I of our Exploring Non-Traditional Income series, we review the implications of today’s ultra-low yield environment and the changing opportunity set in private markets. We also explore three areas backed by economic intuition that may serve as attractive defensive income solutions:

  1. Infrastructure: need for infrastructure spending
  2. Agriculture: scarcity of farmland
  3. Private Credit: bank retrenchment
Samuel Weiss
Vice President, Institutional Markets

We believe it is increasingly important to consider the benefits of private markets to provide non-traditional income sources and enhanced diversification. By exploring private markets through an economic lens, it becomes clearer where defensive income solutions may truly exist.

In our February 2019 white paper, “Alternative Facts: How Alternative Asset Classes Can Improve Portfolios,” we provided an overview of the alternative investment landscape and what it could mean for investors and the future of asset allocation. Low yields and rising correlations have forced many investors to diversify away from the traditional 60/40 portfolio. Strategies such as agricultural land, infrastructure, and private debt are becoming more favorable options for their diversifying effects and ability to improve risk and reward dynamics.

In this two-part paper, we revisit some of these themes and their implications in a world with persistent low yields, where traditional asset classes are behaving untraditionally. These trends have developed over many years, and the COVID-19 crisis only exacerbated them – stifling economic activity and prompting record-level stimulus measures from fiscal and monetary authorities. Given the current environment and the potential long-term impacts of this crisis, it appears now, more than ever, investors should question traditional assumptions and examine the full investment spectrum to meet their investment goals.

Disclosures

The information presented is for informational purposes only and is not intended to be, and should not be construed as, an offer to sell, or the solicitation of an offer to buy, any investment product. The information should not be construed as legal, tax, accounting or investment advice; recipients should consult with their respective advisers regarding such matters. Views and opinions expressed herein are as of the date of their respective publications and are subject to change with no obligation to update. Statements regarding current conditions, trends, or expectations and forecasts with respect to the financial markets or the global economy are based on subjective viewpoints, as well as public and third-party sources believed to be reliable. There is no guarantee that such conditions or results will materialize.

Investments in emerging markets, non-investment grade credit and alternative investments are subject to various risks and uncertainties, including but not limited to the following: greater volatility, political, economic and currency risks, differences in accounting methods, low-rated or low-investment grade debt securities (which may introduce greater liquidity and counterparty default risks), the use of leverage, and high levels of regulation which could result in risks related to delays in obtaining relevant permits and approvals. All investments include risk, including the loss of the entire investment.