We have been managing Alternative Investment portfolios for clients since 2011, initially as Specialist Investment Management and subsequently as Kennedy Partners Wealth since 2016.
Alternative Investments tend to be available only to wholesale investors as private transactions and are not traditional investments such as equity, fixed interest, cash or direct property. Since the financial crisis in 2008 it has often been possible to achieve better risk return outcomes in the private markets than in public markets in Australia.
We aim to provide our clients with a flow of high quality transactions which enable them to build portfolios tailored to their individual requirement for risk, liquidity and return.
It can typically take 12 to 18 months to establish a suitably diversified portfolio of Alternative Investments as there may only be one or two transactions available at any one time.
- We either manage transactions ourselves or enter transactions managed by a specialised manager. We only use a small number of highly specialised managers
- Each client’s assets are managed in a separate account and not pooled
- We can offer discretionary or non-discretionary investment mandates
- Full web-based reporting plus year-end tax reports
- Clients’ Alternative Investments are generally managed as part of a broader portfolio including more traditional fixed interest securities, Australian and international equities
We are seeking diversification in our alternative client portfolios and categorise the assets into three buckets:
1. High Yield
To us high yield is any fixed interest type security that has an expected return significantly in excess of traditional fixed interest securities. A number of these deals have closed and returned all capital to investors as well as a return of between 9.7% p.a. and 35.66% p.a. Most of these investments are backed by assets such as mortgages or consumer receivables.
2. Property Related
Property Related investments are wholesale unit trusts which have various types of property as the underlying asset. They can be in the form of equity, preferred equity or debt. As the property cycle has matured our investments returns have reflected the increasingly lower risk nature of transactions we have invested in for our clients.
Alternative equity investments are investments in unlisted companies that are expected to achieve high growth generally over a two to five year period. These investments may be held by us directly for clients or managed by a specialised manager or venture capital firm.
In all cases these transactions have been available to wholesale investors only. Participation through Kennedy Partners Wealth has enabled clients to gain access to transactions for less that the stated minimum investment amount as we make one aggregate investment for our clients.
An example is our investment in Auscred Pty Ltd (Lendi) which is Australia’s largest online mortgage broker. Our original investment was made in December 2017 at a price of $71.47 per share. Lendi has raised funds subsequently at $98.99 per share from the ANZ Bank and other investors.
We have offered 50 separate transactions to our clients in the three investment groups:
We have experienced no losing transactions since commencing business.
The chart below shows the value of $1,000 invested by a client in a KPW Alternative Investment portfolio. Returns differ from client to client as each portfolio is different depending on the client’s investment preferences and security selection. The portfolio returned 13.38% pa before performance fees.