The top-performing alternative investment funds for 2022

Alternatives were one of the surprising asset classes of 2022, for a couple of reasons. First and foremost, alternatives were one of the few asset classes to post (generally) positive returns. Of the 26 global and Australian Alternatives funds covered by Livewire markets, 19 of them had a positive return in 2022. Secondly, and very much connected to the first point, Alternatives were surprising because of the increasing interest and investment in them.

Whilst alternatives might seem like the latest fad to some, the reality is that interest in them has been growing steadily for some time. Although the Australian alternatives market is still in its infancy, investment research house Preqin valued the global alternative investment market at about US$11 trillion in 2019. At that time, it also expected the market to grow about 10% on average out to 2025 – when it will be worth $17 trillion

The reason for the growth can be attributed to several factors. The changing market landscape means that traditional relationships and portfolio splits (like the 60/40 portfolio) aren’t as effective as they used to be, and alternatives provide investors with a return profile that can be truly diversified. 

Lucerne Chief Investment Officer, Anthony Murphy, adds that “protecting capital in market drawdowns and generating returns in all market conditions is one attractive component of a well-managed alternatives portfolio”.

How we compiled the list

Below we present the top-performing Alternative funds for 2022, based on those funds listed on the Livewire 'Find Funds' menu (top right of this page). The list was compiled using the information provided here. Please note that this is not an exhaustive list of Alternative funds in the Australian market. The filters we have used are:

• In the “Fund type” box, select “Managed Funds”
• In “Asset Class”, select “Alternative Assets”
• We then manually filtered results based on 1-year returns.

Important: It is also worth noting that fund performances are typically viewed over longer timeframes (i.e. 3-year and 5-year rolling) and that the table above simply captures the best-performing Alternative funds for the past 12 months. Past performance is not a reliable indicator of future return. All data is supplied by Morningstar. 

If you would like to conduct your own research into top-performing funds, you can do so by clicking here.

Big themes

Whilst Alternatives are a broad asset class (including long/short funds, physical commodities, private equity, infrastructure, currencies, and risk), to be at the top of the list this year, a fund had to either capture a big theme, or be a long/short fund - generally speaking. 

There were a few big themes, such as strong commodity prices or a surging US dollar, which drove performance, whilst having the ability to short-sell in a tough environment also proved valuable. Meanwhile, the interest in private assets (equity and debt) continued apace. 

The Schroders Specialist Private Equity Fund was plugged into that latter trend, providing access to a broader universe of companies than those listed on public exchanges, including many early-stage and growth-orientated companies.

The Totus Alpha funds, whilst focussing on businesses with a demonstrated track record of profitability, high returns and strong cash flow generation for long investments, were also able to take short positions in lower quality businesses facing cyclical and/or structural headwinds, deteriorating earnings quality, and catalysts for share price underperformance.

The Maple-Brown Abbott Global Listed Infrastructure Fund was plugged into the theme of inflation protection and low volatility, in an environment that saw surging inflation and high volatility. 

And finally, the founder of Datt Capital, Emanuel Datt has been bullish on Australian energy companies for some time, and he rode that bullrun in energy names to be the top-performing alternative asset fund for 2022. 

#5: Schroder Specialist Private Equity Fund

Managed Fund

Schroder Specialist Private Equity Fund

Alternative Assets

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In a climate of lower interest rates and elevated valuations, investors may be looking for a new way to generate returns, while providing diversification away from the volatility of traditional listed equity and fixed-income markets. Private equity offers investors the potential for enhanced overall returns and diversification to help meet longer-term investment goals.

Schroders' Claire Smith recently spoke to Glenn Freeman about how they look at private equity in the wire Another way to dodge the drama of equities and bond markets. 

#4: Totus Alpha Long Short Fund

Managed Fund

Totus Alpha Long Short Fund

Alternative Assets

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In August last year, Lucerne Investment Partners' Anthony Murphy, nominated the Totus Group offerings as his go-to manage fund, which he uses within the Lucerne Alternative Investments Fund, for the following reasons.

Ben is a realist and often avoids the hype and fads the stock market and investing can bring. His continued disciplined approach has delivered investors a return of 16.5% p.a. since inception with a substantial amount of that out-performance being delivered in weak equity market conditions.

The Totus Alpha Long Short Fund gains its exposure by investing in the Totus Alpha Fund (“Underlying Fund”) and cash. The underlying strategy concentrates on long-short investing in Australia and developed market equities (primarily in the US).

#3: Totus Alpha Fund

Managed Fund

Totus Alpha Fund

Alternative Assets

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#2: Maple-Brown Abbott Global Listed Infrastructure Fund

Managed Fund

Maple-Brown Abbott Global Listed Infrastructure Fund

Alternative Assets

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The Fund aims to offer investors higher yield, inflation protection and portfolio diversification benefits through investing in global listed infrastructure equities. It aims to outperform an accumulation index comprised of the OECD Total Inflation Index plus 5.5% per annum over rolling 5-year periods. 

Maple-Brown Abbott uses a tight definition of infrastructure assets and seeks low-volatility cashflows and inflation protection to achieve diversification benefits with other asset classes such as global equities. Taking a high-conviction approach ensures Maple-Brown Abbott's strongest stock views are included in the portfolio. The strategy is expected to have between 25 and 35 global investments at any one time.

In February last year, Maple-Brown Abbott founder, Andrew Maple-Brown, wrote about Finding opportunities in the topsy turvy world of transportation infrastructure.

#1: Datt Capital Absolute Return Fund

Managed Fund

Datt Capital Absolute Return Fund

Alternative Assets

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The Datt Capital Absolute Return Fund aims to achieve double-digit net returns over a 2-year timeframe, irrespective of the underlying market and economic conditions. Datt Capital mitigates market risk by diversifying and deploying its funds across multiple asset classes and non-correlated investment strategies. 

As noted above, Datt has been bullish on energy for some time, telling Livewire's Glenn Freeman in December last year that Whitehaven Coal (ASX: WHC) was his pick of ASX energy stocks. It has served Datt well over the past 12 months, with his eponymous fund returning 43% over the period. 

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