The Case for Alternatives
In an environment of compressed traditional asset returns and elevated correlation, thoughtfully selected alternative investments can play a critical role in building more resilient, diversified portfolios.
Butler Family Investments' alternative investments practice provides our clients with access to a curated selection of non-traditional asset classes and strategies. We believe that for investors with appropriate time horizons and liquidity profiles, alternatives can offer meaningful benefits: diversification away from public market volatility, access to return streams that are less correlated with equities and bonds, and the potential to capture premiums associated with illiquidity, complexity, and specialist expertise.
However, we approach alternatives with clear-eyed pragmatism. Not every alternative strategy delivers on its promise, and the dispersion of returns between top-quartile and bottom-quartile managers is significantly wider in alternatives than in traditional asset classes. Manager selection, therefore, is paramount. We dedicate substantial resources to identifying, evaluating, and monitoring the managers and strategies we recommend, applying the same rigour we bring to every aspect of our investment process.
Our role is to cut through the complexity and marketing noise that often surrounds alternative investments, providing our clients with honest assessments of the risks, costs, and realistic return expectations associated with each strategy. We only recommend alternatives where we believe they genuinely enhance a client's overall portfolio, not as a source of fees or a badge of sophistication.
Real Estate & Infrastructure
Tangible assets with the potential for income generation, inflation protection, and long-term capital appreciation.
Real Estate: Our real estate allocation encompasses direct property investments, co-investments alongside specialist operators, and carefully selected real estate funds. We focus on sectors with strong structural demand drivers, including logistics and industrial, residential rental, life sciences, and data centres. Geographic diversification across the UK, Europe, and selectively in other developed markets helps manage concentration risk. We evaluate each opportunity on the basis of location quality, tenant creditworthiness, lease structure, capital expenditure requirements, and realistic exit assumptions.
Infrastructure: Infrastructure investments offer the potential for stable, long-duration cash flows underpinned by essential service provision and, in many cases, regulatory frameworks or long-term contracts. Our infrastructure allocation includes renewable energy assets such as solar and wind, transportation infrastructure, digital infrastructure including fibre and tower assets, and social infrastructure. We favour core and core-plus strategies where cash yield is a primary return driver, complemented selectively by value-add opportunities where our team has specific expertise.
Private Credit & Lending
Income-oriented strategies that capitalise on the structural retreat of traditional bank lenders from significant segments of the credit market.
The private credit market has expanded significantly as regulatory changes have constrained traditional bank lending, creating opportunities for non-bank lenders to provide financing to creditworthy borrowers at attractive risk-adjusted terms. We access this market through a combination of direct lending co-investments and allocations to specialist private credit managers.
Our private credit allocations span senior secured direct lending, unitranche facilities, asset-backed lending, and selectively, mezzanine and subordinated debt strategies. We prioritise managers with disciplined underwriting standards, strong workout capabilities, and demonstrated performance through full credit cycles. Loan-level transparency, covenant quality, and portfolio diversification are key evaluation criteria.
We are particularly cautious about the risks inherent in private credit, including illiquidity, valuation subjectivity, and the potential for credit deterioration during economic downturns. Our due diligence process includes detailed analysis of each manager's underwriting process, loss experience, portfolio construction approach, and the alignment of their fee structures with investor interests.
Digital Assets & Commodity Strategies
Emerging and established alternative asset classes that can provide unique diversification characteristics within a broader portfolio context.
Digital Assets: We recognise that blockchain technology and digital assets represent a significant area of innovation in financial markets. Our approach to this asset class is measured and research-driven. For clients with appropriate risk tolerance and investment horizons, we provide access to digital asset exposure through regulated vehicles and institutional-grade custody solutions. Our focus is on established protocols with clear utility, strong network effects, and robust security architectures. We do not speculate on early-stage tokens or unproven protocols, and we are transparent about the elevated volatility and regulatory uncertainty that characterise this asset class.
Commodity Strategies: Commodities can serve as a portfolio diversifier and a hedge against inflation, though their role requires careful calibration. We access commodity exposure through a combination of systematic strategies, specialist commodity trading advisers, and, where appropriate, direct investments in commodity-linked real assets. Our commodity allocation is designed to capture the diversification benefits of the asset class while managing the inherent volatility and the complexities of contango and backwardation in futures markets.
Our Manager Selection Process
Rigorous, multi-dimensional evaluation to identify managers with genuine skill, operational integrity, and alignment with our clients' interests.
Investment Process Analysis
Deep examination of each manager's investment philosophy, sourcing capabilities, underwriting standards, and decision-making framework. We assess whether the stated process is genuinely followed in practice and whether it is repeatable across market environments.
Performance Attribution
Detailed analysis of historical returns, decomposing performance into its component drivers to distinguish genuine skill from market beta, leverage, or fortunate timing. We evaluate performance across full market cycles, paying particular attention to drawdown behaviour and recovery periods.
Operational Due Diligence
Comprehensive review of each manager's operational infrastructure, including fund administration, custody arrangements, valuation policies, compliance frameworks, and business continuity planning. Operational failures can be as damaging as poor investment decisions.
Team & Organisation
Assessment of the stability, depth, and quality of the investment team, including key person dependencies, succession planning, compensation structures, and the overall culture of the organisation. We favour teams with low turnover and strong internal alignment.
Alignment of Interests
Careful evaluation of fee structures, co-investment levels, fund terms, and governance arrangements to ensure that the manager's economic incentives are genuinely aligned with those of our clients. We negotiate terms actively and advocate for investor-friendly structures.
Ongoing Monitoring
Continuous post-investment monitoring including regular manager meetings, portfolio-level analysis, peer group comparisons, and reassessment of the original investment thesis. We maintain the discipline to exit positions where our conviction has diminished, even when doing so is operationally complex.
Our Approach
A disciplined framework for incorporating alternatives into a broader investment strategy.
Portfolio Assessment
We begin by analysing your existing portfolio to identify specific diversification gaps, return enhancement opportunities, and risk factors that alternative investments might address. This assessment considers your liquidity requirements, time horizon, tax position, and overall risk budget to determine the appropriate role for alternatives.
Strategy Selection
Based on the portfolio assessment, we identify the alternative strategies and asset classes that are most likely to achieve the desired objectives. We present a clear rationale for each recommendation, including realistic return expectations, risk characteristics, liquidity terms, and fee implications.
Manager Due Diligence
Each recommended manager or strategy undergoes our comprehensive due diligence process, covering investment capability, operational infrastructure, team quality, and alignment of interests. We maintain a concentrated approved list, preferring depth of knowledge over breadth of coverage.
Implementation & Oversight
We manage the implementation process, including subscription documentation, capital call management, and ongoing monitoring. Regular reporting provides transparency into the performance, risk characteristics, and liquidity profile of your alternative investments within the context of your overall portfolio.
Explore Alternative Investment Opportunities
Alternative investments are not appropriate for every investor, and their role within a portfolio requires careful consideration. We invite you to discuss your circumstances with our team to determine whether and how alternatives might enhance your investment strategy.
Schedule a Consultation