Outlook for alternatives

Scope Ratings expects 2016 an increasingly sharp competition among operators of alternative investments funds. The asset expertise and the access to attractive investment opportunities will be of greater importance to survive competition. Moreover, asset managers must manage higher risks, which investors are willing to accept to gather greater return, adequately and capital efficiently using innovative structures, says Scope.

Alternative investments remain in the focus of investors as especially institutional investors increase their exposure to real assets. Many asset managers thus try to concentrate on the market for institutional investors but Scope Ratings doubts that all asset managers will make this step successfully. “Asset managers that have been serving this target group for many years, have established an appropriate network, have an successful performance track record and advanced reporting system are at an advantage. The same applies to those that were taken over by bigger asset managers and have access to new sales channels and attractive investments,” says Scope Rating in “Ausblick 2016: Alternative Investments und AIF”.

The outlook for the asset class real estate is positive as they offer attractive returns compered to other low risk assets such as government bonds and money or fixed income investments. Even if real estate returns have fallen in the last years as more investors have entered the market and drove up prises, Scope expects the returns of real estate investments to remain stable or even increase. For 2016, Scope expects an return of 2.5 percent on average with outliers between 1.5 percent and 5 percent.

For renewable energy, the outlook is stable. Especially assets with grandfathering will develop positively in value as fewer projects are started and more investors are acting on this market. For new projects, Scope projects a worsening of their risk-return profile as investors become more likely to accept higher risk associated to a project’s location and particulars. In the mid term, many countries will adopt market based compensations systems. Lower compensations will decrease the amount invested in renewable energies due to lower returns. For 2016, Scope expects returns of four to six percent for onshore wind and photovoltaic energy as well as nine to twelve percent returns for offshore wind energy. 

In the segment of transport, Scope expects an increasing demand from investors for plains due to lower kerosene prices and continually increasing passenger numbers. Investors favour funds with a diverse portfolio of places due to their higher resistance against temporary shocks such as political unrest and terrorism attacks.
Scope outlook for ships is negative as long as the ship market does no stabilise and overcapacity is not reduced. The market for such risky assets is only attractive for few investors.