Structured products remain top choice for SA investors, survey

South African investors are increasingly looking at alternative investments with cryptocurrency, private equity, and solar taking the lead as the preferred route to achieve their goals.

According to alternative investment fund manager Jaltech’s Alternatives Investment Survey, structured products, hedge funds, and cryptocurrencies were the most popular choices when it comes to alternative investments.

The popularity of these investments stems from various factors, including the desire for diversification, the potential for higher returns, and the opportunity to invest in financial assets that are not correlated with traditional markets

Cryptocurrency investments (27%) are the most popular alternative investment for individual investors, followed by private equity (12%), solar/renewable energy (11%) and structured products (10%). Going forward, solar/renewable energy will be at the top of investors preferences in relation to the alternative investment segment, with 23% expressing interest in this asset class.

‘The popularity of these investments stems from various factors, including the desire for diversification, the potential for higher returns, and the opportunity to invest in financial assets that are not correlated with traditional markets,’ stated the report - the survey also unveiled that 79% of investors plan to increase their allocation to alternatives.

Financial advisors did not exhibit a clear preference, as five of the asset classes surveyed fell within a relatively narrow range of 10% to 17%. The top asset classes among financial advisors were structured products (17%), hedge funds (15%), emerging markets investments (12%), private equity (11%), and Section 12J investments (11%).

A point to note is the lack of investment into Impact/ ESG from investors (zero percent allocation), while financial advisors do allocate less than five percent client capital to this asset class.

Individual investors continue to show little interest in Impact/ESG investing, whereas financial advisors appear to be maintaining their focus on private equity (14%), hedge funds (13%), and structured products (13%), which align with their traditional investment strategies. However, in contrast to individual investors, financial advisors are increasingly intending to offer ESG/Impact-based investments to their clients, with the percentage rising from four percent to eight percent.

The survey findings suggest that alternative investments are gaining momentum in the South African market, as both individual investors and financial advisors are increasingly seeking to get returns beyond traditional assets.

However, the report unveiled a ‘disconnect between investors and financial advisors as to their reasons for investing in alternative investments’ as the leading reason for investors investing in alternative investments is the expectation that alternative investments will generate high returns. In contrast, 93% of financial advisors don’t consider the return profile of alternative investments as a persuasive factor.

The survey found that 64% of individual investors invest in alternative investments while 65% of financial advisors offer alternative investments to their clients; and most investors (69%) allocate 1-10% of their portfolio to alternative investments.

According to the poll, 38% of investors invest in alternative investments with the expectation that they will generate high returns; and 93% of financial advisors don’t consider the return profile of alternative investments as a persuasive factor and instead see value in the diversification alternatives offer, along with their lack of correlation to traditional investments.

In addition, over 75% of both investors and financial advisors have a preference for exposure to both local and offshore alternative investments, as opposed to having 100% exposure to either local or offshore investments.

Click in the link to read the full report.

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