Economy
Shaping Investor Portfolios with Alternative Investments
In building a strong investment portfolio, it is important to consider several investment options.
Diversification is a critical consideration when building a portfolio as it helps to spread risk across various assets whilst ensuring that financial goals are attainable.
As a result, it is always advisable to have a balanced mix of traditional and alternative investments in any given portfolio.
Traditional investments include stocks, bonds and cash. Any other financial asset that does not fall under the conventional investment definition is classified as an alternative investment.
Examples include real estate, private equity, venture capital, infrastructure, distressed securities, hedge funds and collectables such as artwork, antiques, vintage wines, stamps, and several others.
Alternative Investments have a low correlation with traditional asset classes, making them suitable for portfolio diversification. Investments are generally long-term, close-ended and unlisted.
Alternative investments have been around for decades but have gained significant traction in recent years. Volatile money market returns coupled with evolving attitudes towards wealth building and the emergence of an innovation culture have generated interest in alternative investment strategies.
We have seen an increase in investors embracing unconventional strategies such as crowdfunding schemes, cryptocurrencies, and early-stage venture capital. Given this demand and the increasing flight for yield, the market has seen a rise in alternative investment product offerings globally.
According to a recent McKinsey & Company report, the current surge in alternative investments is only the beginning of a new wave of growth.
The report states that institutional investors are exploring new paths and increasing their allocations to alternative investments. It also suggests that alternative investments are increasingly becoming mainstream.
There are a number of reasons why alternative investments are rising in relevance to investors. A few of them are:
Potential for Higher Returns
Many alternative investments offer more attractive returns than traditional investments. Given the active management involved in some alternative asset classes, as well as the long-term holding periods, there is a likelihood of generating superior returns. Also, the illiquid nature of the asset class commands a premium over traditional investments.
Diversification Benefits
Most alternative investments are high-risk investments; however, they provide strong diversification benefits. Given the low correlation of returns with traditional investments, the inclusion of alternative investments in a portfolio provides great diversification potential by spreading risk across multiple assets.
Reduced exposure to volatility
Investors are exposed to reduced volatility given the low correlation with traditional asset classes. This provides portfolio stability in the long term.
Access to Unique Investment Opportunities
Alternative Investments provide investors with a variety of options that are not readily available in other asset classes. The asset class also comprises the vast majority of investable options in the marketplace. For example, broadly speaking, most unlisted, privately-held businesses are potential opportunities.
Alternative investments are a great way to add diversification, variety and return enhancement to an investment portfolio.
However, as with any other investment, goals and risk tolerance must be taken into consideration before funds are allocated. Such investments should be approached with prudence and sound judgement, given their illiquidity, complex nature, and degree of risk.
Appropriate investors with a high capital base and adequate risk tolerance can participate in the alternative investments space with advice and guidance from a financial adviser.
This point was aptly made by Rodney Sullivan, the editor of the Journal of Alternative Investments and a professor at the University of Virginia Darden School of Business.
According to him, alternative investments “are still perceived as a risky asset class, but the risk isn’t bad as long as that risk is diversified and offers a consistent return.”
He added that the onus falls on financial advisers to ensure that they use their expertise to guide clients in the right direction.
Caveat: Please note that this piece should not be taken as advice for investment
By Adedapo Adesanya
Nigeria’s maiden shipment under the African Continental Free Trade Area (AfCFTA) has successfully arrived at the Mombasa Port in Kenya.
According to the Nigeria AfCFTA Coordination Office in a statement, the development marks a historic moment for Africa’s trade landscape.
The Senior Trade Expert at the Nigeria AfCFTA Coordination Office, Mr Olusegun Olutayo, said in line with its mandate under the leadership of the National Coordinator, Mr Olusegun Awolowo, the office had coordinated the landmark event.
He said the achievement marked a significant milestone for Nigeria in realising the vision of increased intra-African trade and economic integration championed by the agreement in line with the decision of the AU Assembly at the 31st Ordinary Session of the Assembly.
“In times of escalating geopolitical tension and looming geo-economic fragmentation, AfCFTA presents a perfect opportunity for Africa to leverage trade as a strategic instrument for enhanced market access among state parties.
“This is a historic moment, a realisation of the vision of our continent’s founding fathers and mothers.”
He also said the first consignment which was a synthetic filaments product of Nigeria’s Lucky Fibres Limited (Lush), a subsidiary of the Tolaram Group, was exported under AfCFTA preferential terms.
Mr Olutayo lauded the bold economic reforms of President Bola Tinubu, emphasising their catalytic role in enabling the country’s active participation in AfCFTA, fostering continental economic integration and industrialisation goals.
He also commended the seamless cooperation and commitment from Kenyan authorities, which exemplifies the true spirit of AfCFTA.
He acknowledged the pivotal leadership role of the AfCFTA Secretariat in fostering the success and emphasised the collaborative efforts of the Kenya AfCFTA Implementation Committee and the Kenya Revenue Authority (Customs).
According to him, the shipment, exported under AfCFTA preferential trade terms, underscores partnership, shared vision, the agreement’s potential to transform Africa’s economic landscape and pave the way for a new era of trade-driven prosperity.
The AfCFTA seeks to create a single market across Africa by reducing barriers to trade, investment, and labour.
The agreement’s goal is to increase socioeconomic development, reduce poverty, and make Africa more competitive globally.
On March 21, 2018, the AfCFTA agreement was adopted and opened for signature in Kigali, Rwanda. The agreement entered into force on May 30, 2019 and officially commenced on January 2021
Former President Muhammadu Buhari established the National Action Committee on AfCFTA (NAC) in December 2019.
By Adedapo Adesanya
The Nigerian Securities and Exchange Commission (SEC) has fixed January 31 as deadline for all Capital Market Operators (CMOs) to renew their operating licence.
In a circular to the operators on Sunday, the apex regulatory agency in the country’s capital market said the annual registration renewal would last between January 1 and 31, 2025.
SEC said the annual registration renewal enforcement for CMOs was aimed at ensuring that only “fit and proper” persons operate in the capital market, warning that CMOs without valid registration will be penalised and may be excluded from capital market activities.
”This is to inform all CMOs and the general public that the annual renewal of registration of CMOs for the year 2025 will commence from January 01.
“All CMOs applying for renewal are required to include their 2025 annual subscription receipt from their respective trade groups as part of their application.
“In line with the commission’s Rules & Regulations, all CMOs are to complete the process of renewal of registration for 2025 on or before January 31 via registration renewal portal at www.eportal.sec.gov.ng,” it said.
The commission added that CMOs desiring to make enquiries or get support to complete the process should contact [email protected].
The regulator said it had in 2021 re-introduced periodic registration renewal by CMOs to create a reliable active operators’ data bank in the country’s capital market.
It said the renewal arrangement aimed at updating operators information on capital market for official use by local and foreign investors, other regulatory agencies and the public.
The agency added that the renewals would drastically reduce incidences of unethical practices by CMOs which may affect investors’ confidence and impact the capital market negatively, noting that the exercise will strengthen supervision and monitoring of CMOs by the commission.
By Adedapo Adesanya
The third trading week of 2025 ended on a positive note at the NASD Over-the-Counter (OTC) Securities Exchange, with seven equities on the platform inspiring a 1.24 per cent growth.
Consequently, the market capitalisation of the bourse increased by N21.56 billion during the five-day trading week to N1.075 trillion from the N1.053 trillion quoted in the preceding week (Week 2) as the NASD Unlisted Security Index (NSI) expanded by 37.98 points to 3,111.91 points from the 3,073.93 points it ended in the preceding week.
In the period under review, the volume of transactions went down by 42.1 per cent to 9.45 million units from the 16.30 million units in the previous week, as the value of trades declined by 53.1 per cent to N48.4 million from the N104.11 million, with these transactions completed in 122 deals involving 15 different stocks.
Industrial and General Insurance (IGI) Plc gained 50 per cent in the week to close at 36 Kobo per share versus 34 Kobo per share, Mixta Real Estate Plc increased by 20 per cent to end at N2.58 per unit compared with the previous week’s N2.15 per unit, and Okitipupa Plc rose by 10 per cent to N39.59 per share from N35.99 per share.
Further, UBN Property Plc grew by 10 per cent to N2.20 per unit from N2.02 per unit, Newrest Asl Plc jumped by 9.9 per cent to N31.38 per share from N28.53 per share, FrieslandCampina Wamco Plc surged by 3.7 per cent to N39.65 per unit from N38.22 per unit, and 11 Plc advanced by 0.3 per cent to N256.00 per share from N255.31 per share.
FrieslandCampina Wamco Plc topped the activity chart last week by value with with N0.030 billion, 11 Plc recorded N0.009 billion, Central Security Clearing System (CSCS) Plc raked in N0.004 billion, IGI Plc followed with N0.002 billion, and Geo-Fluids Plc recorded N0.002 billion.
However, IGI Plc was the most traded instrument by volume with 7.5 million units, FrieslandCampina Wamco Plc transacted 0.77 million units, UBN Property Plc recorded 0.38 million, Geo-Fluids Plc traded 0.37 million units, and CSCS Plc posted 0.16 million units.
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