Displaying items by tag: alternatives

Fidelity Investments is expanding its alternative offerings with a new private credit fund. According to Ignites, the company registered the Fidelity Private Credit Fund as a ‘40-Act fund structured as a perpetual-term business development company. The fund will be managed by Fidelity Diversifying Solutions, the company’s new alternative unit. The fund, which will focus on lending to smaller firms, is looking to raise between $100 million and $1 billion initially. The fund will allow investors who don’t necessarily meet the requirements needed to invest in private equity, venture capital, or hedge funds. However, it does require them to have a gross income of $70,000 per year or a net worth of $250,000. According to the fund’s prospectus, net fees for the fund will range from 4.89% for institutional shares to 5.74% for S-class shares. It will also have a performance fee of 12.5% each quarter exceeding 5% growth and 12.5% of cumulative realized capital gains from inception through each calendar year.

Finsum:Fidelity is expected to launch a new private credit fund for investors who typically don’t meet the requirements needed to invest in private equity or hedge funds.

iCapital, a leading global fintech platform, announced today that it agreed to acquire UBS Fund Advisor LLC, UBS’s legacy proprietary US alternative investment manager. The agreement also includes the feeder fund platform that UBS manages. The platform, which is also referred to as “AlphaKeys Funds,” represents more than $7 billion in client assets. It includes private equity, hedge fund, and real estate feeder funds. iCapital will now manage and operate the platform, while UBS Financial Advisors continue to serve their high and ultra-high net worth clients that hold feeder funds. UBS became an investor in iCapital in 2017 and entered into a strategic relationship to structure new feeder funds going forward. It also integrated iCapital’s proprietary technology into its private fund operations. In 2021, the partnership was enhanced to further digitize the UBS Advisor experience. The transaction is expected to close sometime this year.

Finsum:iCapital, which has had a long-standing relationship with UBS, is acquiring its Alternative Investments Feeder Fund Platform which represents more than $7 billion in client assets.

Alternative assets are exploding, but when will they become available in defined contribution plans? Diversified investing is one of the first things taught to advisors, but with many asset classes becoming correlated, it becomes tough to truly diversify portfolios. Alternative assets are one solution. They have the potential to hedge volatility, increase portfolio income, and provide that diversification. Research firm Preqin is projecting that global alternatives assets will hit $23.2 trillion by 2026, up from an estimated $13.3 trillion at the end of last year. However, 401K participants can’t access these asset classes, aside from exposure in target-date funds. Some plan fiduciaries are looking to change that and are reviewing DC plan menu options. But they face a series of tailwinds such as low liquidity and high costs, not to mention concerns from the DOL. As organizations such as the Defined Contribution Institutional Investment Association are exploring the issue, it’s not too far-fetched to think it may become a reality at some point.

Finsum: Defined contribution plans such as 401Ks currently only include traditional investment options, but that may change in the future as plan sponsors and organizations look for ways to add alternatives to the menu.

Most people think of alternatives as either a hedge in their portfolio against traditional market swings, or a big return generator with more risk, but REITs can be a great income generator. Dynex Captial is a great REIT with a 10.38% dividend as of April, and Citadel is a huge holder in the company. Gladstone Commercial real estate has a strong 6.71% dividend and never misses its distribution so it’s ultra-reliable. Finally, LTC Properties has a similar 6.31% dividend but has strong hedge fund love.  Their recent acquisition of LuxeRehab is a signal of their strength and has a good track record with tenants.

Finsum: REITs have lots of dividend options and are a good income alternative for those seeking a solution in this market, however it does have risk. 

Bonds and equities have stood tall in the face of the many windfalls that have faced financial markets in the last month. However, even the bulls are getting worried and alternatives could provide relief and earn higher yield. Real estate via REITs are in a great position as an asset class and could perform well in the upcoming years with higher interest rates. Art is an overlooked alternative which has had high appreciation, outpacing 10 major classes since Covid according to CITI. Finally private equity has been a go to for many investors, and has seen record inflows post-covid while remaining less correlated with equities.

Finsum: The biggest draw to private equity is that fixed income is more correlated than ever with stocks and so alternatives provide a better hedge.