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Most LICs on the ASX invest in ASX shares or global shares. But WAM Alternative typically invests in unlisted businesses and assets.
The tagline of the LIC is that it invests in “unique opportunities beyond traditional assets”.
At the end of June 2022, WAM Alternative Assets had gross assets of $243.4 million.
What investments are in the portfolio?
Looking firstly at the asset class exposure, there are four areas where the LIC has money allocated.
At 30 June 2022, it had 41.4% of the portfolio in ‘real’ assets, 25.7% in private equity, 5.5% in real estate, and 27.4% in cash.
The LIC provides a little colour on what each of these segments actually mean.
Real assets are a “diversified portfolio combining agricultural assets and investments in perpetual water entitlements which can be sold or leased to irrigators to generate income”.
The water rights in the ‘real assets’ segment made up 35.4% of the total assets.
Private equity is a “diversified portfolio of unlisted companies with long-term and accelerated growth potential.”
Real estate refers to a portfolio of domestic and international industrial office assets.
Talking to Livewire, the WAM Alternative Assets portfolio manager Dania Zinurova said that it has been hard for ordinary investors to get access to these sorts of assets, but an investment vehicle like this LIC is “democratising alternative investing for retail investors”.
The LIC’s strategy is to invest ‘thematically’ and focus on four key megatrend areas. These are essentially just trends but are strong and/or long term in nature.
Those four areas of focus are: a growing ageing population, climate change, digitalisation, and increasing demand for food.
Zinurova explained to Livewire what the investment team are looking for with these trends:
Within those megatrends, we look for strategies that are supported by strong long-term tailwinds and apply a holistic portfolio construction approach rather than follow rigid strategic asset allocation targets.
Let’s look at some of the biggest holdings in the WAM Alternative Assets portfolio.
WAM describes the Argyle Water Fund as the leading non-irrigator water investor in Australia.
Another ‘real asset’ is the Strategic Australian Agriculture Fund, which invests in Australian water entitlements, Australian farmland and associated businesses, and Australian agricultural infrastructure.
Discussing the Argyle Water Fund, Zinurova told Livewire:
As the returns in this asset class are driven by a risk premium (i.e. climatic conditions) that differs from the equity risk premium of public equities, it provides valuable diversification to an investment portfolio.
However, the goal is to reduce the water allocation down to between 15% to 20% of the portfolio over time.
Turning to private equity next.
One investment is Birch Waite, a manufacturer of premium condiments, desserts, and beverages. Another example is aCommerce, a provider of outsourced e-commerce solutions in South-East Asia.
Shopper is another investment, which is the “fastest offline media business” in Australia. Next is esVolta, a developer of utility-scale battery energy storage projects in the US.
The last example is GMHotels, which owns and operates a portfolio of hotel assets in Australia.
Finally, looking at a couple of real estate examples, there is the Revesby Industrial Income Fund in NSW, and a property in Manhatten, New York, at 2 Rector Street.
WAM Alternative Assets share price snapshot
Over the past month, WAM Alternative Assets shares have risen by around 4%.