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Setting the investment agenda

24.11.2020

Monthly Agenda November 2020 - Alternatives

Alternatives total asset under management are forecast to grow by 60%, or 9.8% annualised equivalent rate, taking total assets to US$17.16tn by 2025. Private equity and private debt are expected to see the biggest increase in assets with growth rates of 15.6%p.a. and 11.4%p.a. respectively. As investors increasingly look beyond public markets for attractive returns private equity’s total share of alternatives is expected to grow from 41% currently to 53% in 2025. Asia-Pacific is expected to see the bulk of private market growth given the lower current penetration and higher forecasted GDP growth for the region attracting more private market managers to the region.

Chart 14: Alternatives forecast to grow 60% through 2025

Enlarge Source: Preqin

 

 

Positive developments on numerous COVID-19 vaccines along with short-term delays to future rounds of fiscal stimulus has stalled the strong year to date run in gold as investors look to lock in profits on spot prices that are up 23% year to date. The pace of inflows into gold ETFs has also levelled off in recent weeks following a 37% increase in allocations to gold ETFs this year. Investors in the yellow metal will be looking for any further weakness in the USD and clarity around timing and size of fiscal stimulus packages to act as support for spot prices in the near term. Citi have a 2021 base case price target of $2,100 whilst the bull case price target is $2,325.

Chart 15: Year to date rally in gold stalls

Enlarge Source: Bloomberg

 

 

The shift away from bricks and mortar retail to online ecommerce has seen demand for warehouses and distribution centres increase significantly, the ASX 300 Industrial A-REIT Index is up 35% year to date on the back of this trend. On the other hand, it is no surprise to see the ASX 300 Retail A-REIT has been one of the worst performing sectors of the Australian market with the index down 54% at its lowest point in March. The recent positive news on the vaccine front has however provided a relief rally for cyclically exposed sectors with the Retail A-REIT Index and Office A-REIT Index up 25% and 13% respectively since the beginning of November.

Chart 16: Retail A-REIT gains on vaccine news

Enlarge Source: Bloomberg

 

 

Darragh Kennelly
Investment Analyst

 

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