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
The National Pension Commission (PenCom) has defended its decision to allow Pension Fund Administrators (PFAs) to invest in the parent companies of their custodians, insisting that adequate safeguards are in place to protect contributors’ funds.
The director-general of the pension regulator, Ms Omolola Oloworaran, speaking on Tuesday during the Meet the Press Briefing at the Presidential Villa, Abuja, said the commission’s decision to relax the investment restriction followed a comprehensive risk assessment that found minimal conflict of interest.
She explained that under PenCom’s investment regulations, PFAs are only permitted to invest pension assets in carefully selected instruments that meet stringent criteria, including profitability, strong credit ratings and proven track records.
According to her, the commission regularly reviews its investment regulations, conducts routine examinations and spot checks on PFAs to ensure strict compliance with established risk management guidelines.
“PFAs cannot just go into the stock market and buy any kind of stock. There are strict guidelines. Companies must demonstrate profitability, have a proven track record and satisfy other criteria before pension funds can invest,” she said.
Ms Oloworaran noted that each PFA also operates under the oversight of a board, an investment committee and a risk management committee, providing additional layers of governance to safeguard contributors’ funds.
She said PenCom recently issued a circular allowing PFAs to invest in the parent companies of their custodians after determining that the potential conflict of interest was negligible.
The PenCom boss explained that the parent companies involved are largely Tier-1 banks, including First Bank, United Bank for Africa (UBA) and Zenith Bank, which she described as A-rated institutions with strong financial foundations.
She said the policy was intended to widen investment opportunities for pension funds without compromising safety.
Using Stanbic IBTC as an example, Ms Oloworaran explained that if its custodian is Zenith Bank, the previous restriction prevented the pension administrator from investing in Zenith Bank shares despite the bank’s strong performance.
“We reviewed the risks and any potential conflict of interest and found the risks to be very low. That is why we opened that investment window,” she said.
By Aduragbemi Omiyale
Analysts at Meristem Research have predicted that the inflation rate for June 2026 in Nigeria should marginally rise to 15.95 per cent on a year-on-year basis from the 15.93 per cent reported in May 2026.
The National Bureau of Statistics (NBS) is expected to release inflation numbers for last month later today, Wednesday, July 15, 2026.
In its report sighted by Business Post, Meristem Research said it expects inflationary pressures to re-emerge across key economies in the near term, as the re-escalation of the US-Iran conflict has reignited upward pressure on global oil prices.
It disclosed that this marks a sharp reversal from most of June, when the ceasefire between the two countries helped drive oil prices lower, raising expectations of some relief on the inflation front.
With conflicts now flaring up again, oil prices are likely to increase again, and the anticipated easing in energy-driven inflation may not materialise as broadly as earlier envisaged.
“Nonetheless, some relief is likely from the food segment, where robust supply conditions across major producing regions and softening demand should continue to ease food price pressures,” it stated.
The team also explained that it projected a 15.95 per cent inflation rate because of the lingering effects of persistent food price pressures.
“However, we expect core inflation to moderate as the sharp reversal in energy prices begins to filter through to transportation, distribution, and other energy-related costs, easing underlying price pressures.
“On a month-on-month basis, the combined effect of lower petrol prices, a relatively stable Naira, and the gradual pass-through of reduced energy costs across the supply chain should exert further downward pressure on inflation.
“Based on our assessment, food inflation is expected to remain the key swing factor, as seasonal pre-harvest supply constraints are likely to offset some of the gains from lower logistics costs,” it said.
By Adedapo Adesanya
The duo of Central Securities Clearing System (CSCS) Plc and Afriland Properties Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.61 per cent on Tuesday, July 14.
CSCS Plc saw its stock value drop N9.08 to close at N82.40 per share compared with the preceding session’s N91.48 per share, and Afriland Properties Plc slid by 17 Kobo to sell at N15.00 per unit versus N15.70 per unit.
The losses recorded by the two securities pulled back the market capitalisation by N41.64 billion to N2.546 trillion from N2.587 trillion, and cracked the NASD Security Index (NSI) by 69.36 points to 4,242.31 points from 4,311.67 points.
It was observed that the exchange witnessed two price advancers during the session, led by FrieslandCampina Wamco Nigeria Plc, which gained N1.37 to end at N151.37 per share compared with the previous day’s N150.00 per share, and Food Concepts Plc chalked up 5 Kobo to settle at N2.50 per unit versus N2.45 per unit.
The volume of securities traded by market participants surged by 50.7 per cent to 13.7 million units from the previous 9.1 million units, while the value of securities went down by 79.7 per cent to N65.2 million from N320.4 million, and the number of deals crashed by 3.6 per cent to 27 deals from the previous session’s 28 deals.
At the close of transactions, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with the sale of 3.4 billion units for N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc, which exchanged 2.3 billion units valued at N6.5 billion, and CSCS Plc with 73.9 million units transacted for N5.2 billion.
GNI Plc also closed the trading day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.
