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Key takeaways from AlphaReal’s secure income seminar 2024

At AlphaReal’s Secure Income Seminar, held at The Conduit in Covent Garden, 2 October 2024, experts explored key themes across three panel discussions. The seminar was attended by delegates across DB, DC, LGPS, insurers, reinsurers and consultants.

Panel 1: ‘Secure income:
There’s no time like the present’

Panellists, Chris Palmer; Dan Mikulskis and Ray Wright, discussed how secure income is emerging as a powerful tool for insurers and pension schemes, offering a distinctive combination of inflation protection, stable cashflows and / or impact. Here are the key takeaways:

  • Rising appeal: Secure income assets are attracting institutional investors due to their inflation-linked cashflows, high risk-adjusted returns and in some cases, their impact potential.
  • DB and insurers: These assets align with the long-term liabilities of DB schemes and insurers, offering long-term, stable and predictable income.
  • DC potential: Secure income can also play a key role in investment strategies for DC pensions, balancing income and growth.
  • LGPS opportunity: Strong funding positions and increasing cashflow pressures are driving LGPS investors to invest more in secure income, including assets that can support their impact goals on both a local and national basis. 

Panel 2: ‘The growth opportunity in UK renewables’

Panellists, Rob Gardner; Mark Futyan and Raza Ali, explored the exciting investment potential in the UK’s renewable energy sector, noting that its breadth is a boon for investors seeking diversification in their portfolios. Here are the key takeaways:

  • Diversification: Allocations across technologies like wind, solar and battery energy storage is crucial for mitigating risks, ensuring smoother revenue streams and enhanced resilience against market fluctuations.
  • Additionality: Greenfield projects play a vital role in adding new capacity to the grid and can be accessed by investors as fully consented projects thereby reducing risk.
  • No leverage: An unlevered investment strategy allows investors to mitigate financial volatility from debt, retain more control over assets and achieve stable, attractive returns.
  • Natural Capital: This is a new and growing asset class that can sit alongside traditional assets in a portfolio. Nature, as an asset, can deliver economic value to investors.

Panel 3: ‘What does it mean to be an impact fund?’

Panellists, Charlotte O’Leary; Alex Jones and Maria Vaggione, unpacked how impact investing is evolving to meet both financial and societal goals. Here are the key takeaways:

  • Diversification is key: Spreading investments across health, housing and education can maximise both returns and community impact.
  • New frameworks: The UK’s SDR will set clearer standards for impact measurement, with Europe set to follow suit.
  • Verification matters: Independent assessment can be helpful to demonstrate the authenticity of impact.
  • LGPS focus: Impact funds can help the LGPS deliver pension security and positive outcomes for local communities.

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UK Market Monitor Q3 2024

There was little change in nominal and real gilt yields over the quarter. The average reduction was c14 bps for the nominal yield curve, and c8 bps for the real yield curve.