Floyd Tyler, portfolio manager of the Preserver Alternative Opportunities fund, runs through five of his top investment ideas for alternative sources of growth and income.
His fund is long only and invests mainly in event-driven structured credit and tactical trading strategies.
UBS Trumbull Property Income fund
The UBS Trumbull Property Income fund primarily invests in participating mortgages, meaning the developer gives up 50% of excess cash flow from the property and 50% of the gains when the property is sold.
It was launched in 1981 and has around $2.6 billion in 47 investments, mainly apartments across the US.
It seeks a 5% real rate of return and to provide positive quarterly returns regardless of market conditions.
Tyler has allocated 4.4% of his fund to this strategy. It currently yields around 4.5% and the historical annual return is about 9%.
‘Effectively, even though we are debt investors in the security, you get some participation in the upside of the property,’ he said.
Vinacapital Vietnam Opportunity fund
The VinaCapital Vietnam Opportunity fund is a London-listed closed-end fund that is made up of domestic Vietnamese securities.
It follows a high-conviction, multi-asset strategy, and focuses on sectors that benefit from domestic consumption and infrastructure growth in Vietnam. The fund is in the process of reducing direct real estate investment and rebalancing its portfolio toward private equity investments where it sees opportunities in the consumer discretionary, education and healthcare sectors.
The fund moved from the junior UK stock market to be included in the FTSE All Share in March last year, which Tyler said should improve its visibility.
He highlighted that the fund’s shares traded at a 20% discount to its net asset value but that this did not reflect its performance.
‘There is not a strong reason for that discount to exist because they have done a good job of managing Vietnamese equities,’ he said. ‘That’s the kind of unique investments that investors should be looking for.’
‘We think airports are underappreciated assets because most people think of airports being primarily linked to passenger growth. But in the case of the Sydney Airport, only 50% of the revenues come from passenger growth,’ Tyler said.
The rest of its revenue comes from retail and parking fees so half of the business does not have anything to do with airline traffic. It is also the largest airport in Australia and is located in the tourism and business hub of the nation, he added.
Fortress Transportation and Infrastructure Investors LLC
Infrastructure finished 2016 as a golden boy with investors queuing up to invest following Donald Trump’s surprise election win and promise to spend bigly on a huge rebuilding project.
Tyler said Trump’s plans would have no impact on his decision to hold New York-listed Fortress Transportation and Infrastructure Investors LLC, which owns and acquires transport equipment and infrastructure in aviation, energy, intermodal transport and rail. This includes 77 engines and airplanes, and a railroad running from Quebec to Maine.
The firm had $1.6 billion of assets as at September last year and Tyler said its shares currently trade at a 10% discount to book value.
‘What you have is a diverse mix of infrastructure assets that you can buy at 90 cents on the dollar, which grows off a 10% per year dividend. It’s just in ramp-up phase,’ he said. ‘The dividend is covered simply by the aircraft assets.’
Stone Ridge Reinsurance Risk Premium Interval fund
Last but not least of Tyler’s top tips is insurance-linked securities fund Stone Ridge Reinsurance Risk Premium Interval fund.
The firm, Stone Ridge, was launched in 2012 by former Magnetar Capital hedge fund co-head of portfolio management Ross Stevens, and unveiled the fund in October of the next year to offer access to reinsurance-linked investments.
‘It’s an interesting way for investors to get exposure to that asset class and it is very hard to replicate,’ Tyler said.