The best performing asset classes in FY24

Scottish football fans and Australian investors were both dealt a blow this week. While Scots were reeling from an early Euro 24 knockout, Australians were hurting from the hip pocket, with new analysis from VanEck revealing that they likely missed out on the most lucrative investment opportunities over the last 12 months.

The ‘VanEck 2024 Alternative Assets Outlook’, released this week, explores the global fund manager’s latest macroeconomic views and outlook for a range of listed alternative asset classes, which were found to be the top-performing investments overall over the last 12 months.

Bitcoin led the charge (107% return), followed by global listed private equity (36% return). Gold returned 22% and global listed private credit achieved a 20% return. The most widely held asset, Australian equities, achieved a softer 13% return. (Data over 12 months to 25 June; as always past performance is not an indicator of future performance). 

VanEck Portfolio Manager, Cameron McCormack, said: “One of the key learnings from the last 12 months is that being selective and having a diversified portfolio is the key to riding the economic cycle successfully. Those who avoided risk assets amid fears of a recession may have missed out on the stellar markets run led by listed private equity and credit, gold and bitcoin. Our last Investor Survey showed these assets aren’t commonly held by Australian investors, with only 11.9% owning bitcoin, and even fewer private credit or private equity holders.

“Investors who overlooked these opportunities may get a second chance, with several tailwinds supporting the upside potential of alternative assets in the near term. We are optimistic on the outlook for gold due to upcoming rate cuts, elections uncertainty in the US and Europe, and growing concerns about rising debt in developed markets. Bitcoin is polarising, but we’re seeing many investors test the waters and allocate a minor amount of their portfolios to capture any potential growth.

“Similarly, Australian investors are under-allocated to private markets despite accelerating activity in this space. Superannuation funds and insurance firms are clamouring for private market opportunities, and private equity firms are under significant pressure to deploy record levels of accumulated cash reserves, notwithstanding the valuation test of portfolio companies may be stress tested.”

VanEck’s analysis also revealed that the outsized returns from listed alternative assets were not necessarily correlated to greater risk. 

“Alternative assets are often dismissed as ‘riskier’ investments. However, our modelling shows an optimal allocation to listed private equity, listed private credit or gold has historically enhanced returns without changing the target risk profile when added to a traditional equity and bonds portfolio.

“These unconventional opportunities haven’t been accessible to most Australian investors until recently. Exchange traded funds (ETFs) have removed the constraints, giving Australians a convenient, liquid and cost-effective gateway to invest in listed private equity and credit, gold and bitcoin with the same ease of buying shares on the ASX. As always, we recommend speaking to a financial adviser prior to making any investment decisions,” added McCormack.