South Africans are turning to ‘alternative investments’ – including solar and crypto

 ·7 Jun 2023

South Africans are increasingly turning to alternative investments, with investments in cryptocurrency, private equity, and solar being highly popular amongst investors.

This is according to Jaltech’s – an alternative investment fund manager that manages over R1.6 billion – first-ever Alternatives Investment Survey.

The survey had 1,3000 participants, including over 200 investment advisors, and looked to gain insight into alternative investment trends and the behaviour of investors and advisors.

“The popularity of these investments stems from various factors, including the desire for diversification, the potential for higher returns, and the opportunity to invest in financial assets that are not correlated with traditional markets. Consequently, 79% of investors plan to increase their allocation to alternatives, ” Jonty Sacks from Jaltech said.

The results from the survey showed that structured products, hedge funds, and cryptocurrencies are traditionally the most popular choices regarding alternative investments.

However, when it comes to future investments, Jaltech said that individual investors and financial advisors are starting to look at alternative investments in renewable energy, technology/AI, and cryptocurrencies, with these asset classes seen as having significant growth potential.

According to the survey, cryptocurrency (27%) is the most popular alternative investment for individual investors.

Private equity (12%) is the second most popular, only slightly ahead of solar/renewable energy (11%).

Over the next two years, solar/renewable energy will be the most popular alternative investment segment for investors, with 23% expressing interest in the class.

Jaltech said that the expected interest in solar is unsurprising considering South Africa’s continued battle with load shedding.

Investments in  Technology/AI (14%) and cryptocurrency (13%) are also expected to be popular amongst investors.

Other key findings from the survey include:

  • 64% of individual investors invest in alternative investments.
  • 65% of financial advisors offer alternative investments to their clients.
  • 69% of investors allocate between 1-10% of their portfolio to alternative investments.
  • Financial advisors generally favour structured products, hedge funds, emerging markets, and private equity.
  • 38% of investors expect alternative investments to generate high returns.
  • 93% of financial advisors don’t consider the return profile of alternative investments as a persuasive factor and instead see value in the diversification alternatives offer, along with their lack of correlation to traditional investments.
  • Over 75% of both investors and financial advisors favour having exposure to both local and offshore alternative investments.

Despite the increasing popularity of alternative investments, Jaltech said that tackling obstacles related to information access and ensuring more financial advisors have the relevant licenses will help further grow the alternative investment industry.

Read: It’s time for a recovery in South Africa’s crushed markets

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