Interactive Investor

3... 2... 1... Liftoff! Countdown to new asset classes

23rd June 2021 12:03

Myron Jobson from interactive investor

Strap in for the long haul if you're tempted by this new space-themed investment trust, says interactive investor.

Alternatives have long been seen as a way to add diversity to an investment portfolio, with bonds, property and infrastructure traditionally seen as part of the mix.

But the past few years have seen the rise of other types of alternative investment, some more high risk than others. Step forward cryptocurrency, which is even dividing some investment managers (and giving the FCA plenty to think about, too). 

An arguably less divisive foray into new alternative asset classes has been music royalty rights, as investors stray from the beaten path in the continued hunt for yield. Most recently, Pershing Square Holdings (LSE:PSH) investment trust has also got in on music royalty rights action via Pershing Square Tontine (NYSE:PSTH), a special purpose acquisition company (SPAC) which it manages and which has agreed to acquire 10% of outstanding share capital in Universal Music Group. 

Now, space technology has caught up with science fiction, and the upcoming planned IPO of Seraphim Space Investment Trust (LSE:SSIT) presents everyday investors with an opportunity to invest in the ‘final frontier’ through an investment trust for the first time.

This follows the recently launched (and trading under Star Wars inspired ticker: YODA) Procure Space ETF USD (LSE:YODA). Listed on the LSE in early June, it is Europe’s first space thematic ETF and for an ongoing charge of 0.75%, it tracks the S-Network Space index.

Kyle Caldwell, Collectives Editor, interactive investor, says: “The proposed launch of the Seraphim Space Investment Trust is the latest innovative investment idea vying for a place in portfolios. Others in the “alternative” asset class space to have struck a chord in recent years include music royalty investments, and cryptocurrency. 

“They are competing for capital against the more traditional alternative investments that are held in a portfolio – commodities, private equity and infrastructure. Alternative investments tend to comprise a small part of a portfolio – with the majority held in shares and bonds. Investors need to bear this in mind when considering one of the newer alternative asset classes.  

“If your interest is piqued, you need to look under the bonnet and discern whether this alternative is going to add spice to your portfolio, or whether it’s going to be a bit more bland but give some downside protection.”

Tom Bailey, Collectives Specialist, interactive investor, adds: “With many leading space-related companies still in their infancy and therefore not yet listed, the trust is likely to have exposure to many unlisted companies. The closed-ended nature of investment trusts makes them an ideal vehicle for giving investors access to companies not yet listed on a stock exchange.

“The trust defines the sort of companies it will hold as those ‘which rely on space-based connectivity or precision, navigation and timing signals or whose technology or services are already addressing, originally derived from, or of potential benefit to the space sector’.

“Rather ambitiously, the trust says it is targeting an annualised net asset value total return of at least 20% ‘over the long term’.” 

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “It is fitting that the Seraphim Space Investment Trust is launching almost 52 years to the day man first landed on the moon. Like a number of things that were once considered science fiction and futuristic on shows like Star Trek, everyday investors will be given the opportunity to invest a portfolio of space-related activities wrapped up in an investment trust structure. 

“It is a genuinely novel and exciting prospect for investors who will be hoping that the sky is not the limit when it comes to a return on their investment. However, investors should strap themselves in for the long haul. Any new asset class is worth at least our attention – but it’s important to do your homework and make sure you are sitting comfortably.

“Investing on new assets is risky, but at a time where equities are being buffeted by inflation fears, having a small portion in alternative assets as part of a well-diversified portfolio could pay dividends. But don’t forget more conventional asset classes.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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