Colin&Cie with new structure for alternative investments
Alternative investments are an important optimiser of the risk/return profile in a portfolio. In Colin&Cie's mandates, too, they have proven their worth as a substitute for traditional investments such as bonds and equities. What are the differences between alternative and traditional investments and what improvements does Colin&Cie achieve with the use of the new structure?
In the context of asset structuring, a distinction is made between traditional and alternative forms of investment. Traditional investments include, for example, financial products traded on the stock exchange such as bonds and shares. Alternative investments include hedge funds and real estate as well as private market investments that are not traded on the stock exchange, such as loans (private debt) and participations (private equity).
The term "alternative investments" can be somewhat misleading, as this asset class already represents much more than an alternative for many wealthy private clients. Often, real estate investments, loans and participations even account for a larger share of total assets than what the banks call traditional investments. To answer the question of what the differences are between the two forms of investment, the factors that influence a financial investment help us: return, risk and liquidity.
The basic principle of an investment is that the investor is compensated for taking risks with a return. The return is therefore a risk premium. Those who invest only in traditional investments such as bonds and shares therefore only have the risk from these asset classes in their portfolio. Alternative investments have a different risk-return ratio than traditional investments. Due to their low or partly negative correlation, they often move in opposite directions to them and thus increase the risk diversification within the portfolio. As a result, fluctuations can be reduced without having to forego returns. A comparison of two portfolios in the period 2016 to 2022 confirms this statement. The portfolio with alternative investments has a lower fluctuation margin and a higher return compared to the portfolio without alternative investments.
In contrast to bonds and equities, which are traded daily on the stock exchanges, alternative investments are rather illiquid assets. Moreover, alternative investments are very difficult to access for private investors and are often opaque and non-transparent.
Colin&Cie has been using alternative investments in its mandates since 2016. As part of the continuous development of this asset class, our aim is to exploit its advantages as fully as possible and to reduce its disadvantages as far as possible.
In this context, a new structure will be used, which builds on the proven structure of the past and yet brings significant improvements. The core element is the introduction of active portfolio management and the associated flexibilisation of liquidity management. Before, the investment of uncalled capital amounts and the servicing of early redemptions were almost completely ruled out by the strict purpose of the target investments. The new structure makes it possible to invest the surplus liquidity in a yield-oriented manner and to meet redemption requests from clients to a certain extent. Another advantage is the reduction of the minimum amount per target investment from 20 million Swiss francs to 5 to 10 million Swiss francs. The target investments can thus be increased in number and spread over several companies as well as sectors. Conclusion: A broadly diversified portfolio can now be actively managed.
With the new structure, the realisation of which will begin this year, we believe we are ideally positioned for the future to provide high net worth private clients in Switzerland and all countries of the European Union with access to the advantages of alternative investments. We always analyse whether this asset class suits an investor in an individual discussion.
Disclaimer - legal notice
This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. The information contained in this publication is marketing material that is distributed for advertising purposes only.
