PM specialist seeks to improve portfolio outcomes for advisers

Spire Capital has created an investment guide to help Australian financial advisers select the best private market investment options for their clients across a suite of product offerings.

The free guide, called “Surfing the wave, avoiding the reef”, enables advisers to determine the risks and opportunities of allocating to private markets where inconsistent product approaches can make it difficult to “compare apples with apples”, according to the firm.

Head of investments Stuart Haigh said the recent “rapid-fire” increase in interest rates across major global economies have created a challenging investment environment for portfolio constructors – advisers included.

For those with access, Mr Haigh added, private markets can be a source of diversification and improved risk-adjusted returns but could also introduce a new set of risks.

“Here in Australia, the top 10 performing large superannuation funds have an average 29 per cent allocation to global private markets,” he explained.

“As private wealth firms continue to institutionalise, the ‘democratisation’ of and increased access to private markets is being supercharged by a combination of ‘regulatory pull’ – pension systems in the northern hemisphere granting retail investors access to global private markets – and ‘product push’, private market investment managers creating new products.

“However, the proliferation of new semi-liquid investment opportunities creates a new set of considerations and risks for advisers.”

As such, Spire Capital investment manager Scott Dingle has spent the last year leading a review of the expanding opportunities for semi-liquid funds.

“Getting across the deal-flow is challenging for [advisers] and is compounded by inconsistent approaches to product design and terms. Spire Capital thought it important to share its expertise and help the adviser community at a critical time,” Mr Dingle commented.

He confirmed that the guide identifies 10 key areas that will be important to understand as the universe of semi-liquid funds continues to gain traction, including fees, liquidity, portfolio assets, valuation approaches, deal allocations and fund structuring.

Mr Dingle said that the firm’s intention for the investment guide is for advisers to be able to access private markets in a considered and well-informed way.

For real estate, Spire Capital has focused on demand-resilient sectors such as under-supplied residential apartments and industrial assets. For infrastructure, the firm determined that “true” infrastructure provides a good diversifier with inflation linkages.

“We’re seeing attractive relative value at the moment in private credit but think you need to have your eyes wide open to some of the risks emerging in that space,” Mr Dingle added.

“For private equity, we like secondaries to take advantage of attractive discounts to NAV and rapid diversification benefits. We prefer buy-out over growth and favour managers with strong operational value creation capabilities.”