When looking to balance an investment portfolio there are number of factors to consider, but one of the most important is the mix of assets, and diversification. Non-correlated assets, or what some people deem ‘alternative investments’, are one way of ensuring a portfolio is not geared too heavily in one area because the price movements are independent of core financial/international markets.
If your portfolio is solely made up of traditional investments, which are correlated to the international markets, your entire investment portfolio will move in accordance with those markets – therefore the idea behind diversification is not to have all your eggs in one basket. Examples of non-correlated investments include – Real Property, Private Equity Ventures, Fixed income Bonds and Precious Metals.
Deciding what assets are suitable for your portfolio is the job of your financial advisor, however, fixed income is currently a very popular way of diversifying away from traditional assets. There are few reasons for this. Investors currently have a fear of another unexpected turn in the market, especially after the UK’s decision to leave the EU has increased volatility across Europe, and are looking for non-correlated securities that are liquid, and pay a fixed dividend.
Therefore, investing in a non-correlated monthly-paying fixed income security allows for a hassle free investment. You also get to see the fruits of your investment – receiving a cash interest payment, as opposed to a monthly NAV statement is a great way to see that your investments are working. Fixed income assets, such as corporate and government bonds, asset-backed securities, municipal bonds, and money-market instruments, are essentially one of the only ways to generate predictable returns especially when markets are volatile.
Centaur Investments provides a number of fixed income products, including our recently launched Natural Resources Bond, which is linked to Centaur’s African mining assets, as well as a the Centaur Claims bond, a product which has established itself as an attractive asset class for sophisticated investors looking to diversify their portfolios beyond more traditional financial instruments.