The Role of Alternative Investments in the Asset Allocation Process

Only 19% of securities of the fixed income market offered to you will yield more than 4%, compared to the versus 30% average recorded ten years ago in 2004,” began Olivier Kintgen, Chief Investment Officer, Europanel Research and Alternative Asset Management (ERAAM), in his presentation delivered at the Emergo Wealth Investment Expert Conference on September 19.

“Half of these securities,” he added, “are long-term bonds, maturing in more than 12 years.”

As such, the inclusion of alternative investments in the asset allocation process will prove greatly beneficial, through the diversification it will introduce into investors’ portfolios, The challenges of incorporating alternative investments in the allocation process, however, are many, Kintgen told attendees.

Depending on investors’ balance sheet structure, he said, whether equity or fixed income driven, they will have a wholly different need for alternatives – or indeed, possibly no need at all.

The main challenges investors face, should they decide to proceed, include barriers to entry, finding the appropriate balance between risk and reward, sourcing the best players for the best market environment and monitoring the key timing between investments and redemption.

“In the constantly evolving investment world,” Kintgen explained, setting-up a partnership with a specialist provider is imperative.”

Creating and maintaining such a partnership is required in order to clearly define objectives and compose a solution-based, rather than a product-based model. Concurrently, it may facilitate the identification and access specific idiosyncratic opportunities, such as niche markets with tailor-made products.

Olivier Kintgen has served as CIO and Managing Director at ERAAM since joining the company in 2001. Prior to this, he was the Manager of a fund of futures based on the models developed by Insight Finance, a quantitative research company he co-founded in 1999.

Kintgen has also worked for Bank of America; whilst based in Paris he was in charge of G7 arbitrage and proprietary trading, thereafter taking the position of Managing Director of European Emerging Markets Sales and Trading in London. 


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