Pension Funds Still Showing Strong Interest in Alternatives

One way to beat rising inflation may be to follow the pension fund managers, and their recent move to invest in alternatives.  In early 2013, pension funds seemed to be leery of alternatives, but as we drew closer to 2014, they began to express a keener  interest (Reuters August 2013).  Nowadays, pension funds are still showing a strong desire to review their alternatives and options, and in doing so that group of investors have begun to increase their hedge fund holdings to record numbers.

Pension funds at one time were considered the most conservative investment group, using only traditional, conservative methods to beat rising inflation, but those times are changing quickly. Nowadays, money managers in pension funds, armed with a good reason to invest in higher yield vehicles, are eager to align with any opportunity that will allow them to recapture lost cash reserves and bolster their individual account funds. Record numbers of fund managers are now working the markets with alternatives, looking for big returns.

With both positive and negative viewpoints expressed by hedge fund managers (and so-called “Gurus” of the investment world), alternatives appear to be more and more suitable as global markets recover and grow. Consider the American City of Detroit’s debacle, where more emphasis has been placed on pension funds by pensioners and the public at large to shore up assets and reserves. At the moment, pension managers in the United States can only account for 73 percent of actuarial obligations.  The need for immediate improvement is increasing daily, as pension reform cries are heard.

At the end of January 2014, Moody's issued a report on several of investors' alternatives. The report, entitled: Asset Managers Stand to Benefit from Investor Shift to Alternative Investments, says that increased allocations to alternatives are likelyto continue, as investors - notably pension funds, search for higher returns. This structural shift by pension funds toward greater alternative investment holdings is a positive development for skilled alternative asset managers, who see it as an opportunity to mitigate the common investing risks that are coomonly associated with alternative investments.

Pension funds are increasingly moving towards alternative investments, which offer higher portfolio returns and better protection against inflation and price volatility,” says Soo Shin-Kobberstad, a senior analyst at Moody's and the author of the report. "In addition, asset classes such as real estate and infrastructure offer long-term asset duration and cash flows that match the profile of pension funds' long-term liabilities.

As in any business, Cash is King, and for pension funds especially, the C.I.F. rule (Cash in Fist) applies, as the Boomers retire in mass numbers. Today, more than 20 million Americans look for their retirement check to be what was originally guaranteed, yet city governments like the States of California and Illinois, and others focus their might on pension reform that limits benefits both now and for future retirees. California went so far as hire a Canadian firm to monitor and move funds towards higher returns. Making cuts to cost of living adjustments, benefit reductions and other strategies are under review, as well as considering the move to alternatives. Closing the financial gap for pensions is a critical need. Higher yields have the ability to shore up shortfalls, despite the elevated risk.

When it comes to choosing from the many investing alternatives for investors, there is never too much experience, research or review. Pension funds have taken a beating over the years, which they now are positioning themselves to fill the financial gap that has begun to swell.

If you seek higher yields, alternative investments may be the key to increased wealth.

Why Did I Invest in Shipping Containers And Should You?

Over the last couple of years I have been overwhelmed by the number of investment seekers who have asked me why I invested in shipping containers. For most, it is an investing opportunity that very few knew existed. For others, they were cynical of the international shipping industry's recovery and thus very apprehensive. I must admit, at the beginning I belonged to both of these groups of investors.

I had heard about the opportunity to invest in shipping containers from others in the investment community, but until the GFC in 2008-2009 I had never been given the option of considering it, or learning more about it. For years it seemed to be a secret investment that only a select few investors were given access to. So, when the opportunity presented itself in the form of an email message from Pacific Tycoon, I immediately began doing my research and challenged the investment from every angle.

Like most other investors, I found it difficult to believe that the global shipping industry wasn't suffering like many other industries and that lease rates are not affected by overcapacity in the sector. To my surprise I learned that governments everywhere rely heavily on the maritime shipping industry to fuel their economic recovery, and thus making an investment in cargo containers is like making an investment in economic growth. The truth be told, as nations look to raise their GDP, shipping containers play a vital role in helping them achieve their economic goals. Without a continuous supply of them, it is impossible for countries to maintain steady growth.

From my perspective, any opportunity for investment that is in such high demand around the world and makes such an important contribution to economic growth, is an ideal replacement for struggling equities and uncertain bonds; in any investor's portfolio. This is why I recommend investors review shipping container investments and make a hard comparison to the assets that currently occupy their investment portfolio.

Many Wealth And Fund Managers Are Recommending Hard Assets

With the financial crisis of 2008 still looming over the heads of investors, many are skeptical to invest their money into traditional investment vehicles, such as the stock or bond market. With (on average) a 40 percent loss resulting from the stock market meltdown a half-a-decade ago, investors are seeking alternative assets that offer lower risk and steady returns. To accommodate the investment community’s cautiousness, money managers and advisers are diversifying assets away from the bubble-prone stock market and into hard assets. In fact, several market-research firms believe that the move away from equities and into alternative assets will continue to be a growing trend over the next few years, particularly as investors look to guard against risk and beat rising inflation.

Many analysts believe that hard assets, such as gold, oil, precious metals and gemstones, are attracting interest from retail and institutional investors; because both groups are increasingly looking for portfolio diversification, enhanced returns and lower risk. In the current investment climate, it would seem that in order to reduce the volatility of investing, wealth funds and advisers have been increasingly re-allocating capital into hard assets. As a matter of fact, asset managers who manage portfolios for wealthy investors have suggested that the amount of money in alternative products, such as investing in shipping containers, will see a dramatic rise in popularity and demand over the next five years.

The investment anxiety shown by investors has seen a marked increased since the onset of the financial crisis in 2008 and thus, has resulted in a growing number of advisers and professionals recommending a strategy that includes an alternative asset class. Because of the widespread adoption at the institutional level, it is safe to assume that alternative assets will continue to rise in demand over the next decade, as profitable alternative investments usher in a new age of investing that promises a better investment experience for investors.

40% of Pensions Considering Alternative Assets to Reduce Risk

A global financial marketplace that has been in recovery mode for the last five years is regarded by most to be a challenging, volatile climate for investment. On the other hand, there are those who believe that it is an opportunistic place for investment-seekers to build a portfolio. For instance, the traditional investing strategy, which consists of buying and selling stocks, bonds, real estate etc.; has not been as profitable in today's uncertain economic environment. Because of this ongoing poor performance, 40 per cent of pension funds are considering moving a larger portion of their funds to alternative assets (Aon Hewitt survey), to capitalize on new opportunities that will reduce their portfolio's exposure to common investment risks and influences; like inflation and interest rates.

The Aon Hewitt research clearly illustrates that there is an increasing willingness of trustees and advisers to consider a wider range of asset classes, than has historically been the case before. The data further suggests that trustees are now much more prepared to accept that investing in alternatives has both a key role to play in reducing portfolio risk and may also offer the chance of producing very attractive returns. It also seems that pension funds are more prepared to hire third party expert consultants to expand their range of investment options.

The fact of the matter is that alternative assets have repeatedly demonstrated they are an excellent option to help investors beat rising inflation and reduce risk in their investment portfolio. And although private investors may have started the movement toward alternative investments post-2008, an increasing number of pension funds, financial institutions and investment banks have been swift to re-allocate their capital to the growing list of alternatives, in an effort to provide clients with long-term capital growth and lower their over-all exposure to risk.

This is Why Hard Assets Make Sense in Today's Tough Markets

Today's uncertain, volatile and tough markets can pose a number of challenges for new and experienced members of the investment community. In order to guard against rising inflation and to account for economic uncertainty, the average investor must learn about the advantages of introducing alternative investing strategies, such as the reallocation of capital into hard assets. At the moment, alternative investments like hard assets are being widely recognized as fantastic options for investors to utilize, particularly in a volatile investing environment. This is because, and aside from the fact that they will steadily increase in value over time and offer diversification in an investment portfolio, these investments are very often able to beat rising inflation.

Instead of remaining steadfast on traditional assets such as stocks and bonds, many investors have been shifting their focus to alternative offerings, where profitable commodities such as precious metals and gemstones continue to perform well in tumultuous markets. Apart from the well-known commodities, the demand for hard asset investments like container investing, has continued to experience a dramatic rise in popularity; since the introduction of the Global Financial Crisis. With that being said, the world's extremely wealthy are shifting their investment focus away from holding cash, and instead are placing their money (and faith) into hard assets like shipping containers; that are tangible and far less-likely to be manipulated or influenced by political turmoil and/or financial uncertainty. Given the current economic circumstances, investors may want to consider following their lead.

It would seem that over the last few years, a growing number of wealth fund managers across the globe have been recommending hard assets to their investment clients. This further illustrates the trend in modern investing, that is seeing a strong shift toward introducing a modest amount of well-established alternative assets. The fact of the matter is that investors are realizing hard assets can minimize the risks associated with investing, hedge against inflation and provide ample diversification in an investment portfolio. These are the fundamental characteristics associated with a modern investment portfolio, that has appropriately accommodated for unpredictable global market volatility; now and in the future.

Whilst Bureaucrats Bicker Economies And Markets Suffer

There once was a simpler time, when investing was not as challenging and bankers were genuinely concerned with our personal fortune and immediate well-being. Nowadays, the investment community is facing repeated threat of negative political influence, in addition to the established risks associated with investing in stocks, bonds currencies and real estate. It would seem that in today's struggling markets, investors cannot gain the support of their financial institutions or their government officials.

Take for example the ridiculous and, in my mind, unnecessary political stand-off in the United States. The government shut-down that has resulted there, is costing the American businesses and economy upwards of $300 million per day. That figure only speaks to the monetary losses suffered by the United States, it says nothing about the adverse effects it is having on international investors' confidence. Let me just say that as stocks in the U.S. keep falling, so does investor confidence. And, if politicians do not swiftly address the investment community's rising concerns, the consequences for the American economy and international investor outlook will be more than just “unfavorable.”

Whilst the bureaucrats bicker, economies and markets suffer. It would seem that because of this, it has become increasingly important for investors to include political influences on their checklist of investment risks to be constantly aware of, when choosing their path to long-term investing success. Aside from unforgiving bankers and greedy stock and bond traders, investors can add political unrest to their list of perils to avoid when seeking safe and steady returns.

The fact of the matter is that the radical positions taken by U.S. lawmakers has seriously weakened the super-power's economy, but done very little to strengthen their own political agenda. While officials continue to hold the economy and investments hostage, American investment options will grow less and less appealing, prompting investors to instead seek investment alternatives in appealing emerging markets.

Emerging Markets Must Continue Investing in Economic Growth

As the world economy grows and evolves into the 21st century, there is bound to be some ups and downs along the way in terms of overall GDP. While industry experts have forecast that the global economy will double by the year 2020, many factors will play a role on how it will ultimately unfold year after year until it reaches it’s expected potential value. In the last five to ten years, the emerging markets have been the main driving force behind it’s current growth rate and will still be in the next few years, but they must continue to make the right investments in their individual economies to keep the global economy moving forward.

China, the world’s largest exporter and soon to be biggest importer, has enjoyed double-digit growth over the last 10 years, but has recently announced that it is going to put measures in place to manage a consistent annual growth rate of around 7%; for the next few years. While this news has had a particular negative effect on some markets around the world, China, the world’s biggest emerging market, maintains that it wants to be able to stabilize it’s own economy and by doing so, the entire global economy will exponentially follow suit and become somewhat more stable itself. In the long term, what is best for China will subsequently be best for the rest of the world’s economies.

India, the second most populous nation and an appealing emerging market with incredible potential, has been slow in making the right investments in it’s transport and port infrastructures, and unless they reach their domestic economic goals, the global economic forecasts will not fully come to fruition as expected.  However, the government does have an ambitious target for building it’s required infrastructures and is just now starting to generate more interest from the private sector to help build India’s foundation for it’s economic future. Other major emerging markets such as Brazil, Russia and the continent of Africa to name a few, must also continue to make giant investments to grow their GDP in order for the global economy to continue to grow into it’s vast potential, and they seem to be on the right track but still have much work and further investments are needed; if they intend to keep up the pace.

When it comes to these types of large investments, these emerging markets must think long-term and continue to grow their economies even if the overall global economy goes through some tumultuous times. Without investment to attain future prospects, there simply won’t be any rewards to be gained down the road. As the old saying goes ... you can’t win the game, if you don’t play. When it comes to enjoying long-term investment success, investors can’t get a return in the future if they don’t invest in the first place.