Seven Investment Management has increased its alternatives allocation by nearly six percentage points – a record high – in response to elevated stock market valuations and concerns about “plenty more political turmoil” to come following last week’s election.
The discretionary fund manager has recently said cash weightings across its portfolios have reached close to all-time-high levels.
In its balanced fund, the exposure to alternative strategies – excluding gold, infrastructure, private equity and property – has gone from 2.5 per cent at the start of 2016, moving to 5.5 per cent a year ago, to its current weighting of 8 per cent.
7IM senior investment manager Damian Barry says: “We have always been able to find interesting opportunities in the alternatives space and it continues to offer up options that are attractive in the current conditions.
“Last week’s hung parliament suggests plenty more political turmoil lies ahead, vindicating our effort to search out regulated and liquid strategies that don’t travel in the same direction as mainstream financial markets and are not so susceptible to negative political and economic events.”
Among the alternatives of choice, the firm has opted for UK Mortgages, which is a closed-ended investment company in the sector specialist: debt sector, which “has paid out a decent income along the way”, 7IM says.
It has also recently added alternatives options to its 7IM Asset Allocated Passive funds and added 1 per cent exposure to the AQR Managed Futures Strategy fund for its Balanced and Moderately Cautious funds.
Barry says these strategies aim to offer similar diversification options available to institutional investors, as well as the more traditional asset classes.
He says: “Choosing the right alternative vehicle is key and we are looking at alternatives through the lens of defensive positioning. The challenge is that there is a huge array of investment strategies to choose from and many come with complicated portfolio construction. We believe that having a large and experienced investment team helps us pinpoint the best funds.”