The best-performing Alternative Assets funds of FY23

Every house has a drawer where all the stuff that doesn't have a home ends up. That's one way to think about the Alternative Assets bucket when investing. According to Investopedia, Alternative Assets is a financial asset that doesn't fall into one of the conventional investment categories, such as equities and bonds.

But don't let that somewhat loose description downplay Alternatives' role in portfolios. Over the past decade, the rise of Alternative Assets has been one of the steady trends I have observed in the local market. It is not a new asset class, and institutional investors have been allocating to 'Alts' for decades.

Alternative Assets are growing in popularity

There's no doubt that this is an asset class on the rise. Australia's very own Future Fund has maintained a steady allocation (currently 17%) to Alternatives, and you can make an argument that this is higher if you add in other holdings such as Infrastructure & Timberland.

The era of ultra-low interest rates that we have just seen has also played a role in the rise of Alternative Assets. Investors were squeezed out of safe haven assets like bonds and term deposits, and equities were one clear beneficiary. Still, asset allocators increasingly sought diversification through Alternatives such as private equity, private debt, infrastructure (listed and unlisted), hedge funds and global macro strategies. Investors sought returns uncorrelated with equities and that offered something above the miserly bond returns.

Increasing access to Alternative Assets has also been a catalyst for the rise in the asset class. Once the exclusive domain of institutions and the ultra-wealthy, strategies are now available to retail investors, including via the ASX. Of the 28 Alternative Asset Funds on the Livewire Find Funds section, 23 are open to retail investment, which doesn't include listed products such as LITs and ETFs.

Before we dive into the best-performing Alternative Asset funds for FY23, it is worth adding a cautionary note. Alternative Assets can be more challenging to understand and often involve complex investment strategies. As with any investment, you should take a detailed review of the PDS to understand the fees, the process and the risks. A good financial adviser will also be able to help you understand this part of the market.

How we compiled these lists

The list below was generated from the FIND FUNDS section of the Livewire website (top right of the navigation bar). Morningstar provides the data here, and Livewire makes this available at no cost to our readers to assist in their research.

The filters for this list are as follows:

• In the "Fund type" box, select "Managed Funds."
• In "Asset Class", choose "Alternative Assets."
• Select "Performance View" at the top right
• Then sort the results for "Performance 1 Year (HIGHEST)."

The results

The five best-performing Alternative Asset funds for FY23 are listed below, including private equity, private debt, global macro, infrastructure and hedge funds. I've included a brief description with links to more detailed information.

Note: The table is not a recommendation to invest in these funds, and investors should conduct their research and seek professional advice where appropriate.

#1 Datt Capital Absolute Return Fund

Managed Fund

Datt Capital Absolute Return Fund

Alternative Assets

View

The Fund invests in a concentrated manner, typically holding less than 20 positions, with the flexibility to invest across asset classes. It aims to hold at least 70% of the portfolio in its top 10 positions. Whilst market cap agnostic, the Fund has exhibited a bias towards small and mid-cap investment opportunities. Historically, the Fund has invested in companies as small as $10 million in market cap all the way to >$10 billion in size.

#2 Schroder Specialist Private Equity Fund

Managed Fund

Schroder Specialist Private Equity Fund

Alternative Assets

View

The Fund aims to provide capital growth over the medium to long term by providing exposure to a diversified range of private equity investments worldwide. The Fund is semi-liquid with a focus on buyouts using secondaries and co-investments. There are two areas of focus:

• Small to mid-sized investments in Europe and the US, showing upside potential through business transformation, with reduced pricing cyclicality and conservative use of leverage.
• Growth investments in Asia (particularly China and India) with an emphasis on domestic demand, including consumer services and the growing middle class.

Beyond these focus areas, there are five key industry sectors it typically invests in - Healthcare, Technology, Consumer, Business Services and Industrials.

#3 4D Global Infrastructure Fund (Unhedged)

Managed Fund

4D Global Infrastructure Fund (Unhedged)

Alternative Assets

View

#4 Keyview Flagship Fund

Managed Fund

Keyview Flagship Fund

Alternative Assets

View

The Fund aims to achieve strong equity-like returns with debt-like characteristics through investments in a range of unlisted situations, with the main focus on asset-backed senior secured debt. It seeks to provide consistent positive returns irrespective of the market cycle on a superior risk-adjusted basis. Keyview achieves this by allocating to private market investments with a predictable investment outcome and strong capital protection. The Fund will gain exposure to high-quality assets or businesses through a more secure investment position.

#5 GMO Systematic Global Macro Trust (WHOLESALE)

Managed Fund

GMO Systematic Global Macro Trust

Alternative Assets

View

The GMO Systematic Global Macro Strategy's investment objective is long-term total return. Over a complete market cycle, the Strategy seeks annualised returns of 10% (gross of fees) above the FTSE 3-Month Treasury Bill Index with annualised volatility (standard deviation) of approximately 10-15%. The Strategy takes both long and short positions in a range of global equity, bond, currency, and commodity markets using exchange-traded and over-the-counter (OTC) futures and forward foreign exchange contracts, swaps on commodity indices, equity indices and equities, and index options and other investments.

Conclusion

Only three out of the five funds listed above have a track record of 5 years or more. This is a growth area and a space for investors to tread carefully and seek professional advice. That's not a negative view, it's positive that investors have more choices, but these asset classes and strategies will come with their own risks that investors need to understand. Like that random drawer - there's some good stuff in there, but there is also some stuff you don't need.

To explore Alternative Assets on the ASX, you can see the best-performing Alternative Asset ETFs for FY23 by clicking here.