The strategy, which has a 0.55% total expense ratio, will list tomorrow (15 January) on the London Stock Exchange. It is also available to European investors on the Börse Xetra and Borsa Italiana.

Classified as an article 8 SFDR fund, it aims to offer investors access to commodities associated with energy transition themes such as electric vehicles, transmission, charging, energy storage, solar, wind and hydrogen production.

See also: SJP equity fund aligns with SDR Sustainability Focus label

The ETF will track the underlying WisdomTree Energy Transition Metals Commodity UCITS Index.

Through a partnership with data solutions firm Wood Mackenzie, the selection and weighting of the underlying metals will be based on a forward-looking rating system.

The metals are given an ‘intensity rating’, which combines the demand growth forecast for the metal over three years with a market balance rating that reflects whether the metal is under or over supplied. The portfolio then rebalances twice a year.

Nitesh Shah, head of commodities and macroeconomic research, Europe, at WisdomTree, said: “Metals will be crucial to advance the energy transition. Whether it is to power more electric vehicles or create solar panels, it’s hard to see a world where the development of energy transition technologies is not dependent on the supply of some key metals. However, the challenge is to ensure that the technologies needed to achieve the energy transition are produced at scale.

“The challenge for investors is to navigate through the dynamics of technology shifts, trade policies and sudden increases in metal supply. The expertise offered by our partnership with Wood Mackenzie and a methodology that incorporates both supply and demand drivers help the strategy remain highly adaptive to the evolving market.” 

The Private Intermittent Securities and Capital Exchange System (PISCES) was proposed by chancellor Rachel Reeves during her Mansion House speech last month.

Under the proposals, the new platform would be developed using a ‘financial markets infrastructure sandbox’, which allows the regulator to test the design before finalising the permanent structure.

The Treasury is aiming to bring a statutory instrument before parliament by May 2025, which will provide the legal framework for the PISCES Sandbox.

The FCA said it expects to publish its final rules shortly after. The regulator is consulting on risk warnings for investors around PISCES.

See also: UK unemployment rates remains unchanged at 4.3%

Simon Walls, interim executive director of markets at the FCA, said: “Next year we will ring the bell on a new private stock market that could transform how private companies access funds and grow. It will offer investors more access and a greater confidence to invest in private companies and could act as a stepping stone to public markets for those firms. 

“We want to work with industry and ensure we have the right building blocks in place to support investment in growing companies.” 

Firms wishing to run a PISCES platform will have to apply to the regulator, and once approved will be able to run intermittent trading events.

Further information will be published in early 2025 for firms interested in running a PISCES platform. 

Tulip Siddiq, economic secretary to the Treasury, added: “PISCES will be an innovative new type of stock market for trading for private company shares and is a significant step forward in our reforms to capital markets. It will give investors the chance to get in on the ground floor of some of the most exciting companies and support the growth of those businesses.

“Today’s consultation marks a significant step towards delivery of the new market next year and sits alongside our wider programme of reforms to boost competitiveness and investment. That includes the FCA’s overhaul of the UK listing rules and the creation of pension megafunds which will unlock billions of pounds of potential investment in businesses.”

Bonthron brings over 20 years experience to the role, having managed positive impact funds most of his career. His most recent role came at Artemis, which followed a six year stint as an investment manager with Kames Capital – now Aegon Asset Management.

He also previously held investment manager and investment director positions with Scottish Widows Investment Partnership.

See also: EY: Investors display ‘worrying level of apathy’ to ESG

The appointment marks a return to KBIGI for Bonthron, who was a portfolio manager on the firm’s Water Strategy from 2008-2010.

Bonthron is the fourth hire for the Dublin-based asset manager this year, following the appointment of Ben Cooke as a portfolio manager, Jeanne Chow Collins as ESG and engagement analyst, and Robert Fullam as an equity analyst.

Commercial property has been in a tight spot for the past two years. It was hit hard by rising interest rates, plus concerns over specific sectors, particularly the office market. The MSCI World Reits index lost 27.8% in 2022 and only recovered slightly in 2023 – rising 6.9% against 21.8% for the broader MSCI World. Nevertheless, there have been tentative signs of growth this year, with the index up 29.3%.

Valuations are improving. In November, UK commercial property giant Land Securities said the value of its portfolio rose for the first time since 2022 in the six months to 30 September, with its retail properties and prime London office buildings seeing a recovery. London office specialist GPE also recorded higher valuations.

European commercial real estate valuations seem to have stabilised, with interest rates falling faster than elsewhere.

There have also been some big deals, which suggests growing confidence in the market. Private equity group Starwood announced a £673.5m acquisition of the Balanced Commercial Property Trust in September, while listed warehouse group Segro bought Tritax EuroBox’s assets for £553m in the same month. There has also been significant consolidation among real estate investment trusts (Reits).

This is the complex backdrop facing Yablon. He was promoted to head of listed real estate at specialist Cohen & Steers on 1 January, having previously been head of US real estate at the group.

Fundamentals first

Yablon’s approach is to look at the fundamentals, and find Reits that are undervalued based on those metrics. He says: “We want to deliver better risk-adjusted returns than private real estate to the end-investor, and do it in a way that has full daily liquidity.

“Cohen & Steers aims to take a different view on the future supply and demand of commercial real estate for different property types in different markets. With that analysis, we look at potential occupancy and rental growth, and then we own what we think is cheap based on that analysis.

“When we take a more positive view of rental growth in a particular building, property type or market, it will translate into us having a higher valuation for those companies’ assets, and therefore for that company as a whole. And then in our model, it will look cheap.”

Read the rest of this article in the December issue of Portfolio Adviser magazine

This is in spite of real yields and the US dollar remaining high, usually negatives for gold. But with a notable wobble over the past few weeks, could the party be about to come to an end?

Gold remains relatively lightly used among discretionary fund managers. The quarterly ARC Market Sentiment Survey found that 75% of managers had either no gold exposure or less than 2.5%. No manager had exposure above 10%. 

See also: IIMI urges launching boutiques to consider corporate structure

However, Graham Harrison, chairman at ARC, said: “An investigation of the changes in net sentiment over time displayed by discretionary investment managers to gold reveals a strong correlation with the performance of gold over the previous 12-month period.”

This pattern suggests discretionary fund managers could be about to turn more positive on the asset class. Equally, while the gold price has run up a long way, there are still supportive factors for gold.

George Lequime, manager of the Amati Strategic Metals fund, said: “The big driver in the past two or three years has been a massive pickup in central bank buying. Partly that’s been related to heightened geopolitical tensions, especially in the Middle East and Ukraine. Central banks in countries such as China, Turkey and India have increased the level of gold in their reserves.”

This is still happening. In its latest report, the World Gold Council said central bank buying slowed in the third quarter, but demand remained robust at 186t. Year-to-date central bank demand reached 694t, in line with the same period of 2022. Geopolitical tensions continue to be acute, and may accelerate with a new Trump administration starting in January. This should support demand.

Another factor to consider may be the incoming US administration’s tax, tariffs and deregulation agenda. The consensus is that this may be inflationary. Gold is often seen as an inflation hedge, though the strongest correlation has been during periods of hyper-inflation when investors start to have real fears over the value of their savings.  

Nitesh Shah, WisdomTree’s head of commodities and macroeconomic research, said that until recently investors had come back into gold exchange traded commodities (ETCs) after close to two years of selling between May 2022 and May 2024.

“Since May 2024, there have been approximately 3 million troy ounces of flows into ETCs (i.e. a 3.7% increase), worth $7.8bn (using gold prices as of 10/10/2024),” said Shah.

However, there are also reasons for caution. On the negative side, the gold price has moved a long way, and investors appear to be growing increasingly cautious. The uptick in ETC interest reversed in November, when they saw outflows of $2.1bn. This may have been the Trump effect, which brought a surge in demand for ‘risk on’ assets such as bitcoin and the dollar, but it still should give investors pause for thought.

See also: Analysis: Is the end of the magnificent seven nigh?

The appreciation in the dollar is particularly worrying for gold bugs. Although WisdomTree believes dollar depreciation pressure is already pent-up – and Trump himself has said he wants the dollar to fall – that is not the early signs from the market. The twin deficits should already been exerting pressure on the dollar, but it remains stubbornly strong, and this could continue if Trump enacts his agenda.

If, as is widely expected, the Federal Reserve cuts rates again, and real yields drop, this would be bad for gold. While Trump’s policies are expected to be inflationary, he has seen how the US electorate treated the last administration that presided over ever-higher inflation and may curb his ambitions for, say, tax cuts.

Gold produces mixed feelings from multi-asset managers. David Coombs, head of multi-asset investments at Rathbones, had been holding gold through the iShares Physical Gold ETF, but has been selling it down as the price has risen.

“The yellow stuff hit a record high of $2,787 a troy ounce in October and has remained elevated since. In context, that’s 35% higher than where it started the year and 84% higher than the eve of the pandemic,” he said.

He said while it can be useful to hold a small allocation as insurance against periods of weakness in financial markets, he sees better value in government bond markets and believes locking in yields of 4-5% before the Fed cuts rates again makes more sense.

“Markets that price future interest rates give a 75% chance that the Fed will cut by 25 basis points again when it meets on 17-18 December,” Coombs added.

Rob Burdett, head of multi manager at Nedgroup Investments, is more comfortable with holding gold, saying it still has favourable demand/supply characteristics, can offer diversification and has the potential to offset geopolitical and inflation risks.

WisdomTree’s internal gold model has a forecast of $3,030 for gold by the third quarter of 2025, assuming the consensus economic forecasts hold true. In a bull case, where inflation remains relatively high, but the Federal Reserve continues to cut rates, gold could reach $3,360/oz. In a bear case, where the Federal Reserve doesn’t cut, or even raises rates, gold could fall back to $2,440/oz over the same period.

Amati’s Lequime pointed out investors do not have to buy the gold price. Gold mining companies are, in his view, as cheap as they have been in his lifetime in spite of the rising price. This is particularly true for small and mid cap mining companies. They would usually outpace the gold price, but instead have lagged.

See also: Will bond yields stay higher for longer?

He said: “It’s because we’re fighting against other asset classes that are doing well. The million dollar question is what’s going to take for capital to come back into the sector? And partly, you need other asset class to really underperform and for there to be a pull back in the broader markets.”

After a year in which equity markets have soared, but been led by a narrow range of expensive technology companies, a pull back of this kind is not implausible. It’s been a good run for gold, but predicting its trajectory from here is considerably tougher.

This article originally appeared in our sister publication, PA Adviser

Analysts at the firm identified the £1bn TR Property Investment Trust as a compelling option for investors looking to maximise total returns, bestowing it an AA rating.

By investing in property across Europe, manager Marcus Phayre-Mudge has generated a total return of around 260.4% since taking charge in 2011.

See also: J.P. Morgan proposes wind-down plan for Global Core Assets trust

Yet performance has taken a downturn in recent years, with its share price falling 28.1% since its peak in late 2021.

Nevertheless, researchers at Square Mile commended Phayre-Mudge’s “proven ability in identifying undervalued assets with the potential to benefit from macroeconomic tailwinds,” noting that now might be an appealing time to consider the trust before performance recovers.

“It is an attractive option for investors seeking pan-European listed real estate exposure with the added diversification of a modest allocation to direct UK commercial property,” they added.

See also: Home REIT repays Scottish Widows loan

Alternatively, Square Mile also highlighted the Legal & General Global Real Estate Dividend Index fund as another attractive way to bolster portfolio returns via the property.

This £991m fund provides more of a global exposure to the asset class by tracking the FTSE EPRA Nareit Developed Dividend Plus index, which consists of 300 REITs and real estate companies with one-year forecasted dividend yields of over 2%.

Most (68.4%) of these companies are concentrated in the US, but the remaining portfolio is diversified across the likes of Japan (7.3%), the UK (4.2%), and Australia (3.8%). Since tracking this index in 2016, the fund has made a return of 13.2%.

Analysts at Square Mile said the tracker fund deserved its new ‘recommended’ rating because of its “competitive price,” with the fund costing investors an ongoing charges figure of just 0.2%.

The global commodity market faces an of challenges that could influence its volatility, such as new Trump presidency in the US, ongoing tensions in the Middle East, and natural disasters across the coasts of Mexico and North America.

However, there is also another factor that is probably the most underestimated one — the evolving economic deterioration of China. So why and how exactly is China influencing the commodities market, and what changes can we expect in the near future?

China’s economy has peaked

China has long been considered one of the biggest world economies, but today’s forecasts are not bright anymore — many analysts think the country’s economic peak already passed in 2021.

The main reasons behind this phenomenon is excess production capacity, a downturn in the housing market, and low consumer activity. All together, they will continue to put pressure on prices.

As a result, China’s consumer prices showed no growth in September, with a year-on-year increase of just 0.4%. Core inflation, excluding volatile energy and food prices, slipped to a modest 0.1%, marking a clear sign of a broader economic slowdown.

See also: Is China at a turning point, or will it disappoint yet again?

This also coincides with China’s cheap labour resources nearing exhaustion, an increase in youth unemployment, an ageing population, and may countries in Europe and the slowing down imports their imports of Chinese goods.

The Chinese government is working to manage these changes, yet the situation remains challenging. And without further stimulus, China risks falling into a prolonged period of deflation similar to Japan’s experience in the 1990s.

These incentives will most likely be further increased in order to avoid the Japanese scenario and provide a gradual slowdown in economic growth to about 3.5 to 4.5% per year over the next three to five years.

China’s economy drives commodity markets

Economic shifts in China have a direct impact on global commodities. The country remains the world’s largest importer of key resources such as oil, and any changes in its purchasing behaviour are reflected in global markets.

The volume of China’s oil imports amounts to 11 million barrels per day, which is only slightly below the level of September last year and corresponds to the average figures for the last months. Overall, import volumes remain stable.

However, the average price of imported oil in September decreased as worries about demand from China pressured market sentiment. The oil price has since surpassed $60 per barrel.

See also: Fairview’s Yearsley: China becomes ‘story of September’

As for energy, it remains one of the key components of the Chinese economy. Despite the aforementioned economic hurdles, China has executed strategic adjustments to its energy sector that may soften its economic landing. From 2022 to 2024, the country managed to cut energy costs per unit of GDP by 5–15%.

The decrease occurred due to a few reasons. The first is linked to cheaper purchased resources since China mainly imports resources from countries in difficult economic conditions and offers them discounts of up to 30% relative to market prices.

Secondly, the country has modernized its own energy system, which has increased its efficiency and lowered prices.

How should investors adjust their strategies?

Faced with the problems within the Chinese economy, investors should pay attention to new opportunities in other regions and sectors.

It is worth looking at American companies, especially in promising areas such as energy, artificial intelligence, robotics, and big data. They are likely to increase their output, which also opens up new investment opportunities.

Indian and Mexican companies that can replace Chinese manufacturers in global consumer markets may also be promising. These two countries are actively developing their production facilities and becoming key alternative production centres.

At the same time, it is important to monitor the large volume of natural resources that China exports and look for alternative suppliers. This will help prepare for possible restrictions on Chinese exports or the introduction of export duties.

Some investors are already moving away from Chinese assets and switching to more reliable instruments such as gold or US bonds, with foreign direct investment in China turning negative for the first time since 1998. 

Which particular asset classes and strategies do you anticipate your intermediary clients focusing on in 2025?

At HSBC Asset Management (HSBC AM), we have a multi-strategy approach to managing solutions for intermediary clients in the UK. We have seen strong interest from UK Discretionary Fund Management clients for our ETF and Index range in Model Portfolio Service portfolios as investors are increasingly looking for more flexibility and choice. This is a growth trend continuing into 2025 and have recently launched the HSBC S&P 500 Equal Weight Equity Index fund for this client segment. 

In addition to passives, we’ve also seen growing interest and flows into active management, especially in asset classes such as Healthcare, India Equity and Fixed Income, Global Infrastructure and Global Equities. We have also transitioned our existing Global Property fund into a Global Listed Real Asset strategy solution for the UK market reflecting client demand which is another area of growth for 2025 in our view. Our multi-asset platform continues to remain a core part of our offering for clients in the UK wholesale segment, with more intermediaries outsourcing investment capabilities to model portfolio services providers it demonstrates that multi-asset is set to remain a core component of the market. We now manage over $157bn for clients globally in Multi Asset solutions and are seeing continued support from UK intermediaries within the HSBC World Selection and Global Strategy ranges.

See also: Track to the Future – with William Blair’s Tom Ross

Should end-investors – and, by association, asset managers – be thinking beyond equity and bond investments? Towards what?

Clients are already investing beyond pure equity and fixed income products and we have seen increasing interest in our World Selection multi-asset range. This range has exposure to a global infrastructure strategy run by our alternatives business which demonstrates how private markets are set to become increasingly important for end-investors and asset managers going forward. In time we’d like to see greater semi and illiquid strategies playing a broader diversification role within asset allocation models for end investor’s portfolios. However, challenges remain in supporting access to the space among intermediaries such as client suitability and operational factors, as well as UK fund platforms not currently being able to hold such investment strategies.  

In addition, research from the Investment Association (IA) has highlighted the importance of considering a wider range of asset classes in the current market environment. Monthly data published by the IA has revealed a wide array of best-selling asset classes among retail investors over the past year, ranging from government bonds to money market funds and global equities. This highly diversified support for a range of different investments is a trend that we expect to see continue into 2025.

To what extent do private assets and markets fit into your thinking? What are the currents pros and cons for investors?

HSBC AM’s alternatives business is a core area of growth for the UK, and we currently manage $71bn across diversified capabilities such as hedges funds, private markets, real estate, direct lending, infrastructure debt, listed infrastructure, energy transition and venture capital. 

One of the primary challenges for individual investors regarding private markets currently is the difficulty that many have in accessing the space outside of a multi asset strategy, rooted partly in the operational plumbing underpinning the UK IFA market such as UK fund platforms that still currently require daily liquidity. It is also important to consider the complexity of these assets from a client suitability perspective, which potentially leaves room for more work to make them suitable for UK retail investors, as well as regulatory factors which would need to be addressed to support wider access. That said, the development of Long-Term Asset Funds is aiming in the right direction. Broadly, however, we see the move towards private markets as the direction of travel for the industry and expect that it is only a matter of time.

Given client and regulatory pressure on charges, how is your business delivering value for money to intermediaries and end-clients?

We continue to see strong support among intermediaries and end-clients for our Global Strategy Portfolios. This is a globally diversified multi-asset solution offering an active allocation proposition with a passive fulfilment. It is one of our key propositions for the UK intermediary market and has offered great value for investors, consistently delivering strong returns and performing well against Assessment of Value measures while maintaining a focus on cost.

See also: Track to the Future – with Fidante’s Adam Brown

How much of your distribution is currently oriented towards climate change, net zero, biodiversity and other segments of sustainable investing? How do you see this approach to investing evolving?

Sustainable investing continues to represent a key element of our strategy at HSBC Asset Management. We manage over $70bn in ESG and sustainable strategies as of the end of last year and launched ten new ESG strategies globally throughout 2023.  One area which bears a lot of meaning for me is how we, as an industry, tackle social inequality. HSBC Asset Management gave me the opportunity of launching the social mobility programme a couple of years ago, and while all areas are important such as climate change and biodiversity, we do feel social inequality needs greater exposure.

How are you now balancing face-to-face and virtual distribution? In a similar vein, how are you balancing working from home and in the office?

The intermediary sector is an incredibly resilient part of the financial services industry that provide a significant level of financial advice for retail investors. Speaking with many advisers through and following the pandemic, a high percentage returned to operational normality rather quickly i.e. moving back to being in the office five days a week before other parts of the industry.  I find that it can be easy to gauge the health of the intermediary market by the number of industry events companies approaching us to participate at conferences, which has gone through the roof again in 2024! There’s a new proposal landing on my desk every week.

Personally, I am usually in the office around three to four days a week but it does depend on when I am seeing clients across Northern Europe, as well as the UK, so it can vary from week to week. While it’s important to meet with clients or colleagues in person, we do need a healthy balance of virtual engagement, with the most important factor being that we engage with our clients in a way that they prefer.  Call me old fashioned but I do still like putting on a suit and going into the office.

What do you do outside of work?

Like most parents my kids occupy most of my time one way or another. I’ve had the pleasure of being a 5am poolside swimming parent with my daughter through to spending most of my weekends away with my son who’s competed in motorsport championships across the UAE, Europe and more recently the UK.  One of my own activities which allows me headspace is walking my dogs.

See also: Track to the Future – with Federated Hermes’ Clive Selman

What is the most extraordinary thing you have seen in your life?

Seeing my two children come into the world holds the top spot but that’s an obvious statement! But in my previous life I think I must have been a structural engineer. I joined HSBC Asset Management in 2005 in a global role and remember watching the start of the site excavation for the Burj Khalifa in Dubai. In 2007 I had the pleasure of moving to Dubai with HSBC AM and witnessed the construction of the building which was one of the most amazing things I’ve seen. Even seeing the building in recent times brings a smile to my face. 

Looking a little further ahead, in what ways do you see the asset management sector evolving over the next few years?

As mentioned earlier, we anticipate private markets will likely play a key role in the evolution of the asset management sector in the years ahead. We are committed to this part of the market. So far, the growth has been more institutional, with pension and insurance funds moving into the market, but there is certainly a growing interest among intermediaries who want to develop a stronger understanding of how their clients can access the space.   

In a stock exchange announcement this morning (28 November), the trust said it has made the final payment of £28.6m to the lender following the completion of outstanding property sales. Home REIT had been expected to pay down the debt by the end of the year.

In July, the trust proposed a managed wind-down after it was unable to re-finance its then £114.6m remaining debt.

See also: St. James’s Place to exit property market after 20 years

Borrowings have been paid down through the sale of properties within the Home REIT portfolio.

Michael O’Donnell, non-executive chair of Home REIT, said: “The full repayment of the debt facility with Scottish Widows is a significant step forward for the Company as we deliver the managed wind down strategy.

“The company is now focused upon realising its remaining property assets and on the subsequent return of capital to shareholders in due course.”

When is an alternative not an alternative? To answer this, it’s worth starting by defining what exactly constitutes an alternative investment. The UK asset management industry is responsible for some £2trn of alternative assets versus some £11trn in mainstream assets. The very size of this universe reflects that fact that the alternatives label encapsulates a broad range of different asset types and approaches.

For many, a simple definition may be something that isn’t categorised as equity, fixed income or cash which are considered the traditional components of portfolio construction. I’ve covered multi-asset funds as a fund analyst for many years and in this context, I’ve seen many different genres of funds banded and labelled under the broad alternatives banner.

Asset classes grouped into alternatives buckets include, among others, private equity and debt, digital assets, infrastructure, real estate and commodities such as gold. Within the hedge fund/absolute return sector alone there are further strategies that might fit under the alternatives label with long/short equity funds, global macro funds and CTAs (i.e. trend-followers) being some of the most familiar. While digital assets are a newer kid on the block, regulators and lawmakers are beginning to facilitate their more widespread use.

The growth of alternative allocations in multi-asset portfolios has been an observable trend for many years now. Popularity grew during the lengthy low inflation era when traditional bonds offered little in the way of yield and carried the risk of capital loss for those worried about a shift in the interest rate regime. In this environment, alternatives were a natural diversifier. More latterly, despite a regime change and a more attractive bond market, alternatives have maintained their appeal in portfolios. 

See also: Square Mile’s Fund Selector: IA UK smaller companies funds to watch

A recent look at well-known private client benchmarks showed that currently the ARC balanced benchmark has an allocation to alternatives of approximately 30%. Many DFMs and MPS managers are represented here.  Within the PIMFA conservative allocation, around 17% was allocated to alternatives and a 10% allocation now appears to be commonplace in high-net-worth portfolios. However, at a headline level, it can be difficult to see what type of strategies constitute these allocations because of the breadth of the definition. 

What is key when defining an alternative is a consideration of different risk and reward outcomes. Indeed, this is what makes alternative investment funds and strategies so useful for long-term investors and their portfolios.  They should offer a different risk/reward profile to the traditional asset classes investors are more used to seeing in their portfolios, namely equities and bonds.

A well-managed allocation to alternatives can offer a low and even negative correlation to these other asset classes helping with overall portfolio diversification. As an example of a compelling portfolio diversifier, we would highlight the BlackRock European Absolute Alpha fund which holds a Square Mile AA rating. This is a long/short equity strategy which is managed with a low net market exposure and which aims to deliver a positive absolute return over a 12-month period regardless of market direction. 

Another fund worth mentioning is the Square Mile A-rated WS Ruffer Diversified Return fund. This fund also aims to provide positive returns in all market conditions over any 12-month period with an emphasis on preserving capital. It adopts a multi-asset approach and its holdings will typically include a blend of growth (mainly global equities) and defensive assets such as cash, conventional bonds, index-linked bonds, precious metals and derivatives. This deployment of derivatives to hedge directional market risks is a particular feature of this strategy.

Portfolio diversifiers such as these aim to deliver strong performance (in absolute or relative terms versus markets) particularly during stressed market conditions, when volatility is high or rising.  It is this key characteristic that makes such funds attractive when held in a portfolio.

See also: Square Mile removes Jupiter Global Value rating on Whitmore exit

Which alternative to pick matters to ensure that an allocation to such assets and funds does indeed offer diversification. For example, a highly correlated equity focused absolute return fund will do little to offset the downside of equities during a sell off. Attitude to liquidity, risk and complexity are also pertinent to the selection decisions. Gold and infrastructure are relatively simple to understand while the black box perception of CTAs and global macro funds are more complex and often less transparent. This doesn’t necessarily make them bad but a higher level of due diligence will be needed.  

In addition, those who also value non-financial objectives may find the broad church of alternatives appealing.  For example, private markets and real assets can be one of the most impactful ways of gaining exposure to sustainable or responsible investment themes. It is worth noting that, while many alternatives strategies have daily liquidity structures under the UCITs framework, others such as private markets may be less liquid, but can be invested through closed-ended vehicles.

It is therefore important that portfolio managers and fund analysts are on top of allocations to alternatives and understand with granularity as well as in totality, the risks and rewards that an allocation to these strategies are contributing to portfolios. Most importantly, it is key to ensure that they are fulfilling their job of diversification alongside traditional assets, stocks or funds that are held in the portfolio… otherwise an alternative may not end up being one.

The funds, launched in 2004, manage around £1.8bn property assets.

In a statement, SJP said that the decision comes after a challenging period for the sector as a whole.

See also: Amber Infrastructure’s Morgan: Why infrastructure trusts entry economics are attractive

Since suspending the funds last year, SJP said it has continued to assess the property market, citing caution from investors around property funds following changes to working patterns following the Covid pandemic, which has led to a reduced demand for office space.

Meanwhile, the firm pointed to proposed regulatory changes which may result in the introduction of notice periods for funds holding more illiquid assets, with the wealth manager suggesting the changes could deter investors from investing in open-ended property funds further.

The mandates were gated on 20 October last year, to avoid having to sell properties below their fair market value to generate cash.

Tom Beal, group investment director at St. James’s Place, said: “Since we launched our property funds in 2004, the marketplace and our investment processes have evolved substantially, with the pandemic significantly impacting the wider property market.

“Following the suspension of the fund in October 2023, we have reviewed all options available to us and concluded that the best course of action is to wind down the funds. Doing so over a period of time will allow us to maximise value for our clients.”

See also: Open-ended property funds: Is the future hybrid?

Invesco Global Real Estate has been appointed to manage the wind down of the funds, with the firm expecting the process to take two years to sell the majority of assets.

The closure is the latest in a wave of recent wind downs in the open-ended property sector.

In October last year, M&G announced its intention to shutter its then £565m open-ended UK property portfolio due to “declining interest in open-ended daily dealing property strategies” from UK retail investors.

A day later, Canada Life shuttered its PAIF after assets under management more than halved from £254m to £102m, leaving it “no longer commercially viable”.

The Aviva Investors Multi-Sector Private Debt LTAF will invest across the private debt spectrum, including real estate debt, infrastructure debt, structured finance and private corporate debt.

The strategy has received £750m of initial investment from Aviva’s My Future Focus default pensions solution, which invests in a broad range of asset classes on behalf of the firm’s range of auto-enrolment Defined Contribution default strategies.

See also: Analysis: Is the end of the magnificent seven nigh?

It adds to Aviva’s existing Real Estate Active LTAF, which launched in May 2023, and the conversion of its Climate Transition Real Asset fund to sit under the new regime in March.

Daniel McHugh, CIO at Aviva Investors, said: “We are pleased to add a dedicated private debt solution to our suite of Long Term Asset Funds, further positioning Aviva Investors as the largest provider of LTAFs for the UK DC and Wealth market.

“Private debt is a key growth area for us, and we believe our multi-sector approach will best-capture relative value through the market cycle.

“This should give it potential to deliver strong risk-adjusted returns and diversification to pension schemes, whilst also meeting their liquidity needs.”