投稿人
Tony Davidow, CIMA®
Senior Alternatives Investment Strategist
Franklin Templeton Institute
In the latest issue of the Alternative Allocations podcast series, I had the pleasure of interviewing Jenny Johnson, President and Chief Executive Officer of Franklin Templeton, as we explored the democratization of alternative investments. We began our discussion by examining the firm’s acquisitions of Clarion Partners, Benefit Street Partners, Alcentra, Lexington Partners and K2 Advisors—and why these acquisitions are such an important addition to its offerings. Jenny noted that “Franklin Templeton was founded on the principle of the average investor participating in the stock market through mutual funds. We see a similar opportunity in alternatives, particularly in the wealth channel.”
Institutions and family offices have historically made significant allocations to alternative investments to source growth and income, dampen portfolio volatility through diversification, and hedge the impact of inflation. Product innovation, and access to institutional-quality managers, has helped to fuel the growth and adoption of alternatives investments by the wealth management channel.1
How Institutions Allocate to Alternatives
Alternative Diversification Among Institutional Investors
As of February 5, 2023
Sources: Prequin, CAIA Association (2023).
Jenny and I discussed the need for advisor education, and practical thought leadership, to help advisors and investors in using these versatile tools in the appropriate fashion. She shared the firm’s commitment to educating both investors and advisors regarding the role and responsible use of alternative investments by building a robust library of new content, including white papers, webinars, blogs and podcasts.
We also peered into the future of alternatives in retirement plans. Defined benefit pension plans have historically allocated to alternatives—but the access to alternatives in defined contribution plans has been more muted. Last year exposed the interconnectivity of most traditional investments, with both stocks and bonds being down double-digits.2 Given today’s market environment, and products more conducive to defined contribution plans, Jenny felt this market represents a significant opportunity for advisors and investors.
Lastly, we discussed the relative attractiveness of private markets—especially private credit and secondary private equity—given the prevailing market conditions. Private credit managers can take advantage of the dislocation created by Silicon Valley Bank, as banks have stepped away from lending to small- to middle-market companies, and they can negotiate better terms and pricing.3 Secondaries managers can take advantage of the slowing pace of exits and the overallocation of many institutions and they can also source private equity opportunities at favorable valuations.4
There are even opportunities across real estate despite the headwinds of rising rates, tighter lending conditions and a challenging office environment.5 While there might be an oversupply of office and retail space, there is a shortage of industrial and multifamily real estate. We believe that the changing economy is driving growth in industrial properties, which represents a long-term secular trend.
The democratization of alternative investments represents a positive development for our industry, with the ultimate beneficiary being the individual investor. Make sure you don’t miss an episode by subscribing to Alternative Allocations on Apple, Spotify or wherever you get your podcast.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
ENDNOTES
- Democratizing alternative investments for financial advisors: Why now? (advisorengine.com)
- Alts Angle: Rethinking retirement with alternative investments | Franklin Templeton
- Alts Angle: Disruption creates opportunities | Franklin Templeton
- Alternative Allocations: The growth and diversification of secondaries | Franklin Templeton
- Alternative Allocations: Opportunities in commercial real estate | Franklin Templeton
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. Equity securities are subject to price fluctuation and possible loss of principal. Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
Alternative strategies may be exposed to potentially significant fluctuations in value.
Real estate investment trusts (REITs) are closely linked to the performance of the real estate markets. REITs are subject to illiquidity, credit and interest-rate risks, and risks associated with small- and mid-cap investments.
Privately held companies present certain challenges and involve incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies as well as their general lack of liquidity.