Alternative investments are becoming core

Alternative investments are essential

More and more investors are shifting to alternatives to boost returns, generate income, provide diversification from traditional investments and achieve their goals.
What are alternative investments?
There are two main types. First are private assets such as private equity, private credit, infrastructure and private real estate. They are more complex and less frequently traded than public stocks and bonds, and give investors access to additional sources of return. Hedge funds, the second type, operate mainly in public markets but use less traditional tools such as short-selling and leverage.

Listen to Jim Barry, BlackRock Alternatives Chief Investment Officer, discuss why the COVID-19 shock is not 2008, key themes emerging in private markets investing and where he sees opportunities going forward.

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    JIM BARRY: These are unprecedented times, for challenging our traditional approaches to investing. But in the world of alternatives, we see the opportunities for this asset class, to play an ever more important role in our client portfolios. My name is Jim Barry, CIO for BlackRock Alternatives. Alternative investments are essential. Over the last ten years, they are no longer an alternative, they have become a core part of an investor’s portfolio. In particular, the demand for private assets have increased substantially as investors strive to boost returns, generate incremental income, and provide diversification from the balance of the portfolio. Between 2007 and today, the private market universe has more than tripled in size from two and a half trillion dollars to over eight trillion dollars. However, access to and investing in these longer dated illiquid investments is more complex. The economic impact of the COVID-19 health emergency and the associated market volatility, underscores the critical role that alternatives and specifically private markets can play in building more resilience in our investment portfolios. Why are private assets more resilient? In practice, they tend to be more resilient at the investment level as they have less accounting volatility, are insulated from sentiment, and less vulnerable to forced selling. In addition, given each private transaction is structured for a specific circumstance, they can be manufactured to limit downside risk or insulate cashflows from exposure to broader market factors. Moreover, there are certain asset classes which are inherently less correlated to market factors, for example, wind farms, or music royalties. The current market environment also provides the best opportunities in over ten years for investors. The private market investment vintages post-Global Financial Crisis were some of the best ever. 2020 is not quite the same opportunity given both the maturity of the sector and available dry powder. However, the real stress and dislocation in the real economy is providing private investments with better returns on spreads in more protective structures than its liquid asset equivalent. Another key difference with the Global Financial Crisis is that it won’t be a rising tide that lifts all boats. We expect to see much greater dispersion of outcomes across the economy, sectors and businesses as the fallout from the pandemic both accelerates and drives new structural change in our economy. The beneficiaries of this dislocation with the investment manager, with the origination capacity and reach, the underwriting rigor and discipline, and most importantly, the patience to select the assets well. These are all attributes BlackRock Alternative Investors brings to the market. Thank you for listening.

BlackRock is Tomorrow’s Alternatives Platform

BlackRock can look beyond public markets and traditional investments to find solutions in real estate, infrastructure, private equity, credit, hedge funds and multi-alternatives. We seek to deliver outperformance with true partnership. BlackRock is well-equipped to meet your needs on this journey. We provide you:

Access to quality opportunities
Access to quality opportunities
Our 330-plus alternative investment professionals supplement their networks and know-how with insights from BlackRock’s other 2,000-plus investors around the world.
Greater transparency
Greater transparency
We use some of the industry’s most advanced technology to help your advisor build you stronger portfolios. We monitor 3,000 risk factors daily on Aladdin and track 45,000 private portfolio companies on eFront, our private markets data platform.
An integrated view
An integrated view
We can fully model the whole portfolio to ensure you have a deeper understanding of how alternatives impact the rest of your portfolio.
A new standard of alignment
A new standard of alignment
Our 1,000+ member professional staff works to understand your needs and challenges – and deliver BlackRock’s best use of skill, scale and technology to help you achieve your goals.