How to face liquidity risks across alternatives

Alternative strategies, such as hedge funds, are considered to be the liquid end of the alternative-investment spectrum. This is as opposed to privately traded alternative assets, such as private equity and property. However, there are a few issues to bear in mind when looking at the liquidity of alternative investments.

Understand the liquidity of your investments

For new investors, we believe the process of identifying the right funds and minimising risk comes down to regularly communicating with fund managers and finding those who weigh up the need for liquidity both from their underlying investments and liabilities.

Liquid alternatives may offer substantial benefits from a risk management perspective and an absolute return, as their low market correlation means they minimise market exposure. However, investors may need to look beyond the Undertakings for the Collective Investment in Transferable Securities (UCITS) stamps and conduct their own research into whether a fund has the appropriate liquidity.

There may be benefits to illiquidity

Illiquidity, however, doesn’t have to be a bad thing. Long-term investors can tap into the income stream and capital growth illiquid alternatives, such as real estate, offer. In addition, you may benefit from an illiquidity premium (the expectation of higher returns from securities that may take longer to buy or sell).

Read the full article here:  https://www.blackrock.com/za/individual/themes/alternative-investments/insights/liquidity-risks-alternatives

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of June 2020 and may change as subsequent conditions vary.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Risk warnings. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Important information

This material is for distribution to Professional Clients (as defined by the Financial Conduct Authority or MiFID Rules) only and should not be relied upon by any other persons.

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

Please be advised that BlackRock Investment Management (UK) Limited is an authorised Financial Services provider with the South African Financial Services Board, FSP No. 43288.

Any research in this material has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This material is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

© 2020 BlackRock, Inc. All Rights reserved.



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