Research reveals the alternative assets that offer the best post-COVID opportunity
Investors should be looking at the opportunities that a post-pandemic world is likely to offer – and that includes alternatives says Mercer.
The firm has published new strategic research on how alternative investments can help optimize portfolios in the year ahead following the volatility and unpredictability of 2020.
"We are seeing that though investors have been tested this year, the experiences of previous crises have made them more resilient. There were unorthodox challenges such as not being able to vet new managers in person, but clients continued to put capital to work, especially with existing investment manager relationships across all private market segments," said Raelan Lambert, global head of alternatives at Mercer.
Real estate opportunity
Real estate is one key area of opportunity ahead. The market has been disrupted by the pandemic with more of us working from home, affecting office requirements; and shopping online, affecting retail assets negatively while boosting assets required for the rise in ecommerce.
In North America, Mercer sees the most robust opportunities in real estate connected to life sciences, affordable housing, and logistics. The Greater Toronto Area is noted for its robustness.
"In 2021, investors should consider stretching their risk appetites and consider their allocation to real estate,” added Lambert. “Although the pandemic will continue to challenge the property market, 2021 is likely to be an opportune time for entering the asset class with a medium- to longer-term investment horizon. Initially, investors should prioritize allocations to the largest, most-liquid markets, where price discovery is furthest along."
Among the other alternatives that have potential in the coming months are private equity, private debt, natural resources, and infrastructure. The full report is available at https://www.mercer.com/our-thinking/wealth/optimizing-your-portfolio.html