In April 2025, global markets were gripped by renewed uncertainty and volatility. Investors faced heightened concerns around inflation, currency fluctuations, and weakening global growth—exacerbated by Trump’s return to the White House and the reintroduction of protectionist trade policies. The renewed use of tariffs and the threat of further disruption to global supply chains have materially altered expectations around trade and economic cooperation. In this environment, investors must carefully balance two seemingly opposing forces: diversification and specialisation. Diversification, when implemented effectively in your investment portfolio, can reduce downside risk and deliver a smoother return stream across market cycles. Specialisation—particularly through alternative assets—offers the potential to generate alpha by accessing return streams that are both differentiated and less correlated to traditional markets
In the WAM Alternative Assets (ASX: WMA) investment portfolio, diversification and specialisation work in tandem to consistently deliver absolute returns through a combination of dividend yield and capital growth. WAM Alternative Assets achieves this by partnering with specialist, best-in-class investment partners across a breadth of alternative asset classes including private equity, infrastructure, real estate, private debt and agriculture and water. While the specialist nature of the underlying investment partners creates the potential for outsized returns in their respective asset class, the diversification of asset classes reduces investment portfolio volatility and provides consistent returns across market cycles.
For example, infrastructure investments are typically linked to tangible assets that are essential to everyday life. These assets often provide stable revenues and cashflows through long-term, inflation-linked contracts, offering a degree of protection in inflationary environments. Approximately 15% of the WAM Alternative Assets portfolio is allocated to infrastructure, including critical assets such as airports, utilities, fibre networks, and solar and wind farms.
Further up the risk curve, private equity represents around 25% of the portfolio and involves investments in private businesses where our specialist partners often hold a controlling stake. These partners actively drive value creation through operational improvements—such as changes in management—growth initiatives, and strategic acquisitions. While private equity offers the potential for outsized returns—typically 2.5x to 4.0x the initial investment—it is more sensitive to macroeconomic shifts such as inflation and interest rate movements, and generally does not provide consistent income during the investment term. Therefore, a blend of private equity with more income-generating assets—such as infrastructure, real estate, and private debt—positions WAM Alternative Assets to deliver a steady stream of returns, combining to deliver both income and capital growth over time.
Importantly, alternative asset classes behave differently to public markets. Since Wilson Asset Management was appointed as Investment Manager in October 2020, the WAM Alternative Assets investment portfolio has delivered investment portfolio performance of 9.2% per annum^. For most retail investors, access to these alternative asset classes has previously been limited, if not non-existent, and as a result their investment portfolios have consisted mainly of public equities, debt and residential property (their own home or investment property). The addition of alternatives to such a portfolio can significantly reduce volatility, which translates to a smoother ride for investors across market cycles. This is a key reason why large institutional investors have allocated their capital to alternatives for decades.
As a listed investment company, WAM Alternative Assets gives retail investors access to an institutional-quality, diversified portfolio of alternative assets and access to specialised investment partners that typically only invest on behalf of the largest institutional investors in the market including superannuation funds, sovereign funds and large wealth managers. In addition, WAM Alternative Assets provides daily liquidity via the ASX and is currently delivering an annualised fully franked interim dividend yield of 5.5%, or 7.9% when including the value of franking credits*, with over 3 years of dividend coverage in the profits reserve. As at 30 April 2025, WAM Alternative Assets was trading an at attractive discount of 18.5% to its 31 March 2025 pre-tax net tangible assets.
