Speaking to InvestorDaily, Blue Sky Alternative Investments director Alexander McNab said industry discussion about “simple super funds with low fees” has resulted in institutions directing too much attention towards management expense ratios.
“[Institutions] are more focused on fees than they are investment performance,” said Mr McNab.
This obsession with fees may be restricting institutional investors from investing in asset classes such as alternative assets, despite “the valuable role they play in a portfolio”, he said.
“Most alternative asset classes are actively managed, so they are more expensive than Australian equities,” Mr McNab said.
Including alternative asset classes such as real assets and agriculture in a portfolio alongside equities is important, however, given they have different risk and return characteristics and are likely to perform differently, he said.
“If you’re able to pull together asset classes that have different risk, return, liquidity and correlation attributes, particularly those uncorrelated returns, then portfolio theory would suggest you’ll have a portfolio with lower levels of risk at a given level of return,” he said.
