Alternative Income Solutions
Financial investments involve an element of risk. For further information, please see the risk warning section.
Selected carefully, the best alternative assets can:
- Generate predictable cash flows, which can form part of a cash flow driven (CDI) investment approach.
- Improve portfolio diversification.
- Generate illiquidity premia, defined as higher returns than those available from investing in a public asset of broadly similar credit quality.
- Contribute to downside protection.
- Give investors greater control over assets through tailored legal structures and covenants.
Alternative Income Solutions has over £22bn* of assets under management.
The six asset classes below share a number of characteristics.
- Private assets
- Offer illiquidity or complexity premia over comparable listed credit
*Source: Aviva Investors. All data as at 30 September 2017
Loans on infrastructure projects such as hospitals, schools, roads, utilities, etc. Long‑term stable returns available, with a proven track record of low defaults and higher recoveries than other corporate credit. Improvement in ratings sometimes occurs after a project is operating as expected for a period of time.
Low carbon and social infrastructure financing across sectors such as wind, solar, energy efficiency and biomass. Unlevered nature allows predictable returns without taking additional risk or introducing cash flow volatility by introducing debt. Quality of counterparts and economies of scale provide attractive risk profile in line with investment grade debt.
Loans that assist in financing the purchase or refinancing of commercial real estate such as offices, retail, industrial and logistics, hotels and healthcare facilities. These loans can offer diversification away from typical corporate bond issuers, but with the added security of a physical asset as collateral.
Long-lease commercial real estate let to strong tenants; ground rents. Income is derived from tenants in the public sector or highly rated corporate entities. We seek assets that have either inflation-linked rent reviews or fixed rental uplifts. This ensures we generate a consistent level of returns and reliable annual distributions.
Bespoke opportunities in asset, corporate and public sector financing. Longer maturity opportunities exist in funding local authorities, asset lease financing and collateralised swaps with strong corporate counterparties.
Where funds are invested in illiquid private assets, investors may not be able to switch or cash in an investment when they want because private assets may not always be readily saleable. If this is the case, we may defer a request to switch or cash in shares or units. Investors should also bear in mind that the valuation of real estate is generally a matter of valuers’ opinion rather than fact.
The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency and exchange rates. Investors may not get back the original amount invested.
Alternative Income Solutions Team
For further information contact your Client Relationship Director or Rachel Green, Client Solutions Manager
+44 (0)20 7809 6809*
*Calls to this number may be recorded for training and monitoring purposes.