Growing Interest In Alternative Investment
By Sonia K.

Bandar Seri Begawan - There has been a changing landscape in alternative' investments- over the years. Interest in alternative asset classes has grown significantly since the 1990s.

This observation was made by the Managing Director of Brunei Investment Agency, Dr Hj Mohd Amin Liew bin Abdullah, who was speaking on local government investments in alternatives during the Credit Agricole Asset Management Alternative Investments (CAAM AI) Investment Forum 2008, which was held at the Empire Hotel and Country Club yesterday.

According to him, the momentum behind the increased interest in alternative asset classes, especially from institutional investors, can be attributed to a number of factors such as increased volatility in the equity markets, low bond yields, huge increase in official reserves and the level of investor sophistication.

The managing director ofBIA also talked about what investors look for in alternative investments. Lower overall volatility in their portfolios, better risk-return payoff, long investment horizon and absolute return targets are some of the reasons why some investors favour this type of investment.

"The increased, wealth generated from hydrocarbon revenues and FX reserves, especially over the last few years, have allowed many governments to accumulate more reserves than is necessary from FX intervention," Dr Haji Mohd Amin Liew said as he delivered a presentation on `Sovereign Wealth Fund'.

He said that the excess wealth has allowed governments to set aside funds and invest them through special investment vehicles that aim to create inter-generational equity.

According to him, one of the main advantages of alternative investments is better utilisation of risk budget because of the lower correlation between alternative and traditional asset classes.

As alternative investment are relatively illiquid because some have long lock-up periods, investors are able to earn higher return in the form of 'illiquidity risk premium', he said, adding that this type of investment could also produce positive returns.

"This is in an absolute sense, regardless of the direction of the market, as investments in alternative asset classes are not managed relative to any benchmark. However, this depends greatly on the skills of the alternative asset managers," he said.

Speaking on hedge funds, Dr Hj Mohd Amin Liew predicted that low_ expected returns in public equity and bond markets will continue to support further capital inflows into the hedge fund industry.

"In addition to this, diversification, not only in terms to fund strategies but also managers, will protect the portfolio performance against the potential risk of fund collapse," he said.

In order to sustain long term return performance, investors must actively monitor their capital allocation across the various strategies to ensure that the funds are employed in strategies where opportunities exist, he added.

The two-day forum was organised by the Credit Agricole Asset Management and Credit Agricole Asset Management with the Ministry of Finance as The lead sponsor.  -- Courtesy of Borneo Bulletin

Click Here To Have Your Say On This Story

Brudirect.com News

Brunei's Fastest Growing Website with