Mainstream markets have become too efficient to find good deals, according to Rockpool Investments chair Nicola Horlick.
Speaking at the Alternative Investment Summit in London last week, Horlick argued alternatives give investors the ability to get in on great deals out of sight of the crowds.
After almost 25 years of managing mainstream funds, Horlick changed tack to alternatives in 2007 because she believed there is more reward in the sector.
She said: “When I started, the markets were pretty inefficient and you could make money if you did the work. But now company managers are less likely to speak and are hidden behind the wall of investor relations.”
Horlick said alternative investments, once passed over by investors making double-digit gains in a rising stock market, are now becoming more popular.
She said: “As we know, the UK equity market has gone sideways over the past 14 years, the real returns are dire and if you take into account the amount taken by asset management companies, it is even more dire.”
Rockpool’s strategy is to seek out private equity deals for high net worth investors. Horlick said eight out of nine private equity deals Rockpool launched last year were able to make use of the income, capital gains and share loss tax relief available through enterprise investment schemes.
Hargreaves Lansdown head of research Mark Dampier says while large cap FTSE shares are very accurately valued, there were inefficiencies in small to mid-cap companies which have produced “brilliant” returns.
He adds: “When things go badly wrong, as they did in 2008, private equity gets creamed.”