Session 1 | UK & European institutional investors: Securing attractive risk-adjusted returns in an uncertain economic environment
Panellists Paul Jayasingha of WTW, Stergios Saloustros of Barclays UK Retirement Fund, Oak Pension Asset Management, Rik Klerkx of Cardano and Ed Palmer of AlphaReal focused on current thinking around illiquid assets, and all agreed that there is still a place for the illiquidity premium.
- The ‘denominator effect’ due to market movements means many investors are overweight in illiquids. This is slowly shifting through improving market sentiment and some investors utilising the secondary market to rebalance illiquid allocations.
- The illiquidity premium can mean better risk-adjusted returns and many illiquid asset classes have strong ESG characteristics. The DC market is starting to make progress in better utilising these asset classes.
- Secure income remains attractive due to stable, predictable cashflows and inflation-linkage, particularly to investors with long-term inflation-linked liabilities.
Session 2 | Impact investing: Old wine in new bottles?
Karen Shackleton of Pensions for Purpose, Paul Guilliotti of Richmond and Wandsworth Councils LGPS and Anne Copeland of AlphaReal, focused on ESG and impact, and discussed opportunities and challenges associated with impact investing.
- During the past decade we have seen dramatic shifts in allocations towards various impact solutions particularly amongst LGPS funds, with the focus on solutions contributing towards ‘E’ and ‘S’ in ESG, but with ‘G’ becoming increasingly important.
- UNSDGs are a good benchmark against which to consider which impact investments are suitable for individual investor goals.
- It is important to get started with impact investing today, whilst acknowledging that impact measurement is a continuously evolving space.
Read our paper on demystifying social impact. Please hyperlink- Demystifying-social-impact-investing.pdf (alphareal.com)
Session 3 | Buy-out, illiquid assets and insurers: The liquidity kink
Adam Davies of K3 Advisory, Neil Holmes, bFinance and Shaj Alam of AlphaReal provided an overview of how the insurance bulk annuity market could better accommodate illiquid assets in the future.
- The ‘liquidity kink’ describes the fact that many pension schemes and insurers invest in illiquid assets as part of an efficient portfolio, but require the assets to be liquid at the point of an insurer transaction.
- Not all cases require illiquid assets to be sold and we’ve seen instances where assets are transferred directly to insurers.
- With bulk annuity transactions expected to reach all-time highs, it is important for the market to keep innovating in how to deal with illiquid allocations.
Session 4 | AlphaReal Dragons’ Den
Three members of the AlphaReal team pitched to the audience in a Dragon’s Den style format. This was a light-hearted session that generated great engagement with the audience.
- Scott Gardner, Partner at AlphaReal, reminded the audience that we’re in a climate crisis. He made the case for how AlphaReal’s renewable infrastructure proposition can help investors become “superheroes” by reducing carbon emissions alongside generating attractive returns.
- Boris Mikhailov, Head of Client Solutions at AlphaReal, evidenced through a game of “never have I ever” that everyone needs social infrastructure. He explained how institutional investment into AlphaReal’s social infrastructure proposition is a £50bn+ opportunity set that can provide strong financial returns alongside generating social impact.
- Colin Frearson, Director at AlphaReal, used a pint of Guinness as a prop to tell the story of Arthur Guinness signing a 9,000 year lease on his brewery in Dublin in 1759 a tried and tested structure. He described how commercial ground rents, a form of long income real estate in which AlphaReal is the market leader, can generate long-term, inflation-linked cashflows for investors.
Colin was voted the winner by the audience.
Session 5 | A secure future – what next for secure income investors?
Panellists Ed Palmer of AlphaReal, Mark Thompson of M&G and Ian McKinlay of The Law Debenture Group discussed the future of secure income and where it will sit for institutional investors as well as talking about the future of ESG.
- The secure income market is evolving to meet investors needs and could be attractive to master trusts in the future.
- The changing institutional investor base has seen growing interest from LGPS, insurers and DC investors.
- ESG is a key theme, which is supportive of increased allocations to many secure income real asset strategies.