The alternative investment marketplace has grown rapidly over the last five years, from less than 50 alternative investments in 2008 to over 250 today. And after more than 15 years of poor delivery from traditional strategies, there is a lot of investor interest in alternatives
However, the considerable growth in alternative investments witnessed last year is simply not sustainable. The recent FSA alerts on overseas property investments, Unregulated Collective Investment Schemes and the practice of advising on SIPPs but not on the subsequent investments into alternatives - will all bring about significant changes to the industry in 2013.
The research from Intelligent Partnership's report suggests that the number of products available in the six key sectors (Farmland, Energy, Forestry, Precious Metals, Property and Land) rose by over 400% between 2008 and 2012. Property is by far the largest alternative investment sector growing 73% in 2012 to make up 37% of the products in the market last year. Forestry
is the second biggest sector with over 20% of the products in the market. The timber market has seen consistent growth over the last century and timber prices remain extremely strong.
The research also highlights that alternative investment products generally do not have
a very long life span. This is likely due to capacity, with only a limited area of land, number of rooms or number of trees available to investors. The longest standing investments still actively marketed today are seen in Farmland (going back to 2007), Property (2007), Forestry (2004) and Precious Metals (2001).
Guy Tolhurst, Managing Director of Intelligent Partnership commented:
“With the sector growing as quickly as it has been, and understandably coming under increased regulatory scrutiny, we felt that the time was right to bring all of the knowledge we have learned over the last five years into an industry report. Our intention is to combine this knowledge with our own research and help readers make informed decisions about where they want to take their alternative investment business in 2013”.
The research suggests that as much as 70% of new investments into alternatives in 2012 were made via a SIPP, part driven by the strong growth in the number of new SIPPs being set up on an execution-only basis in 2012. With SIPP numbers now estimated to have reached 1 million with £125 Billion invested through them, how much some SIPP operators have relied on alternative investments to generate new business is unclear. The FSA are rightly concerned that the considerable growth in the number of products could lead to one or two major product failures, resulting in significant consumer detriment and the possible winding-up of a SIPP operator.
Daniel Kiernan, Chief Analyst at Intelligent Partnership commented:
“There are many benefits to alternatives and there is undoubtedly a consumer appetite for these types of investments, but if the sector cannot develop a coherent proposition and ensure high standards all the way along the value chain - from the product provider, to the marketing and distribution and finally at the point of sale - then consumers will learn to stay away and the regulator will make it impossible to do business”.
Intelligent Partnership has achieved accredited status for AiR 2013 from the Chartered Insurance Institute (CII). Readers of AiR can claim one CPD (Continuing Professional Development) hour towards the CII member CPD scheme for each hour spent on the report. Gaining CPD accrediation for AiR as well as their alternative investment masterclass training, demonstrates a commitment to delivering only balanced, informative and high quality content to trade partners.
Tamsin Mills, Director of Accreditation Services at the CII, commented:
“Continuing professional development is a key component of professionalism because it builds consumer confidence by maintaining standards of technical expertise and the practical application of knowledge. Successful achievement of CII CPD accreditation indicates that Intelligent
Partnership’s AiR met the standards expected by the CII in the areas of transparency, quality and professional development. The CII is pleased to recognise Intelligent Partnership’s commitment to professionalism through this CII CPD accreditation.”
Intelligent Partenership believe the considerable growth in alternative investments witnessed in 2012 is simply not sustainable, and foundations have been laid which will bring about significant changes to the industry in 2013.
