Listed Alternatives

Alternative Investments are particulary suitable for Participating in Mega Trends.

In the long term, alternative investments are defined by their unique risk and return characteristics, making them a vital component of strategic asset allocation. Their diversification benefits are particularly significant, enabling more resilient and balanced portfolios. From a financial market perspective, alternative asset classes broaden the investment horizon and improve risk-adjusted returns in diversified portfolios.Beyond the financial-market theoretical arguments, what else supports investing in alternative asset classes? Investments are inherently tied to decisions about specific technologies. For instance, an investor purchasing shares in an automaker is inherently making a decision to align with the associated technologies and innovations.

Technology Investing

In this context, an investor in alternative investments is inherently a technology investor. To better understand the value drivers of alternative investments, it is essential to delve deeper into the concept of technology. Broadly, technologies can be categorized into the following three types:

• Basic technologies are the foundation for the growth and success of other innovations, forming the backbone of every modern economy. Companies in this category are characterized by relatively stable returns and lower technological risk.
• Growth technologies are already established and exhibit high growth rates. These companies are often privately held, medium-sized enterprises. Access to such companies is typically facilitated through private equity funds, often in the context of growth financing or succession planning (e.g., buyouts).
• New technologies hold significant growth potential if they succeed in capturing their target markets. Companies in this category are frequently supported by venture capital funds, either through equity or debt financing.

How can an Investor gain access to a diversified Technologie Portfolio?

From an investor’s perspective, participating in the growth of new technologies is highly desirable. To balance and diversify investment risks, it is equally prudent to invest in well-established basic technologies. The private equity asset class offers unique access to innovative new technologies, enabling investors to benefit from future growth potential. Similarly, private debt also provides exposure to these technologies, differing only in the financing structure—debt versus equity.

In contrast, the infrastructure asset class grants access to core technologies that serve as the foundation for the development of new innovations. These technologies are often found in network industries such as energy, transport, water, and communications. Historically, these strategic industries were predominantly state-owned, but global privatization efforts have now opened up opportunities for a wider range of investors to participate.

Basically, there are two ways to invest in Alternatives Asset Class: Closed Funds or Listed Alternatives.

Alternative asset classes can be accessed through two primary paths, as outlined schematically in Figure 4. The first path involves closed-end funds, which are investment vehicles with a fixed maturity. These funds are fundamentally illiquid, with trading typically limited to the secondary market. They also require high minimum investments that must be committed over a predetermined period. Capital is provided by limited partners (LPs), usually large institutional investors such as pension funds or insurance companies.The second path is through exchange-traded investment vehicles, which represent portfolios of non-exchange-traded companies or diversified fund portfolios. In the case of the infrastructure asset class, for instance, these vehicles often represent operators or concessionaires of core infrastructure facilities. Unlike closed-end funds, which are largely exclusive to institutional investors, exchange-traded options provide a broader investor base with access to alternative asset classes, offering enhanced liquidity and accessibility.

LISTED ALTERNATIVES PROVIDE EFFICIENT ACCESS TO ALTERNATIVE ASSET CLASSES

Listed Alternatives represent an intriguing niche within the equity universe. However, there is currently no standardized industry classification to accurately identify and categorize a representative universe of companies operating in this space. Additionally, no universally accepted definitions exist for the Private Equity, Infrastructure, and Private Debt asset classes.

As a leading research house specializing in Listed Alternatives, LPX AG has wwweloped a proprietary industry classification scheme to address this gap. This classification is essential for creating representative performance benchmarks and ensuring the accurate evaluation of companies in the Listed Alternatives sector.

The selection of securities is guided by a rigorous research process that identifies and classifies relevant companies, as illustrated in Figure 5.

Establishing a standardized classification and determining the relevant base universe are critical steps for enabling innovative investment strategies in Listed Alternatives.

BENCHMARKING

Performance benchmarks are an important research tool to measure and compare asset classes and their sub segments in terms of their risk and return characteristics. The largest and most liquid companies in the base universe are used to construct representative performance benchmarks. The individual companies in the index are weighted according to their market capitalization, with a weight limit of 10% for each company to ensure sufficient diversification within each index.

On this basis, LPX AG has established index families, which can be used as standard benchmarks for alternative asset classes.

LPX
LISTED PRIVATE EQUITY
INDEX SERIES

NMX
INFRASTRUCTURE
INDEX SERIES

DLX
DIRECT LENDING
INDEX SERIES

Listed Alternatives offer attractive Risk and Return Characteristics.

LPX Group is the leading provider of Listed Alternative Performance Benchmarks. Since the underlying index constituents are listed globally on regulated stock exchanges, LPX Group indices are calculated in accordance with generally accepted industry standards in the field of equity indexing. By being based on market prices, the performance benchmarks allow for direct comparisons with other indices or benchmarks. These benchmarks are essential for empirically validating the investment characteristics attributed to alternative asset classes and are widely regarded as standard performance benchmarks.

The following benchmarks are used to measure the performance characteristics of alternative asset classes:

• LPX50 Listed Private Equity Index

  The LPX50 Index represents the global performance of the 50 most highly capitalized and liquid Listed Private Equity companies. The index is diversified across regions, private equity investment styles, financing types, and vintages.

• DLX Direct Lending Index

  The DLX Index reflects the performance of the 35 most highly capitalized Direct Lending companies. It features a broadly diversified private debt portfolio, primarily focused on middle-market companies.

• NMX30 Infrastructure Global

  The NMX30 Infrastructure Global Index captures the global performance of the infrastructure asset class and includes the 30 most highly capitalized and liquid basic Infrastructure companies. The index is diversified across regions, currencies, and infrastructure sectors. Basic Infrastructure companies are defined as entities that own and/or operate core infrastructure network facilities in the energy, transport, water, and communication (ICT) sectors.