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Pension investors should diversify portfolios with alternative assets, says AAA


Following a statement from PDL International’s Sven Kuhlbrodt, in favour of alternative asset investment, Alternative Asset Analysis (AAA) partner, Anthony Johnson, has added his support for this investment approach.

"I strongly agree with Sven Kuhlbrodt’s comments about diversifying a portfolio to minimise risk," says Johnson. "He pointed out that as well as diversifying a portfolio, investing in alternative assets, such as forestry – which do not typically follow the performance of traditional financial markets – is a sensible additional strategy during these particularly volatile times."

Both Kuhlbrodt and Johnson believe that the recent political turmoil in the Middle East and Africa, along with the natural disasters in New Zealand and Japan, have sent the global recovery into disarray in the minds of many investors. As a result, the equities markets have become particularly unstable prospects.

Kuhlbrodt’s statement was in reference to investors looking to make money for their retirement. The majority of pension investments are equity-heavy, leaving many people approaching retirement feeling nervous about how these uncertain economic times will affect their pension savings.

PDL International found that more than half of pension advisers would recommend asset classes that do no correlate with traditional financial markets. Investments in alternative assets, such Brazilian forestry, have a significantly better average return on investment in recent years than stocks and shares investments.

"The real selling point for forestry investment is the simple fact that trees don’t stop growing, therefore, your investment doesn’t stop growing," says Johnson.

"You buy a sapling and sell a large tree. If the market for timber is down, you wait and watch while your investment keeps on growing. Then you sell when the market is stronger," he adds.

Some 48 per cent of pension advisers said they would be particularly likely to recommend alternative assets to investors who are approaching retirement, simply because they offer a safer haven for cash while times are tough in the equities market. Johnson said, "the key is to incorporate alternative assets in your diversified portfolio. It’s all very well spreading the risk, but if all your asset classes are linked to the traditional financial markets, they will all fall in value at the same time.

AAA recommends seeking out ethical forestry investment in Brazil, through a plantation management firm like Greenwood Management or Goodwood, in order to make a wise, medium-to-long term alternative investment.

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