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CIO Khan-Roper names asset classes to cut and those to add

CIO Khan-Roper names asset classes to cut and those to add

A lack of access to open architecture platforms and limited fund selection knowledge has seen Middle East portfolios hold too high allocations to property in many portfolios, according to Nicholas Khan-Roper, CIO at family office Advantage.

Allocations of between 40% and 90% to property remains excessive, according to the Dubai-based head of wealth and chief investment officer. He said this ought to be at around 20%.

‘In the Middle East you will tend to see much higher allocations to property. That is partly because advisers are less used to the art of fund selection and partly because the access to open architecture platforms is becoming increasingly difficult.’

That said, this trend is moving in the right direction, he added.

When it comes to the allocation within the single-family office, which launched in January 2018 and is set to onboard more families by the end of the year, Khan-Roper said he favoured fund managers with a strong active approach.

‘My preference for active managers tends to veer towards those that can truly be dynamic in their approach and are running concentrated positions. Fundsmith and Lindsell Train are great examples of this in the equity space and H20 in the bond space. H20 has a three year alpha of over 16%, which is remarkable’.

One eye on innovation

As for new funds on the radar, Khan-Roper said he is focusing closely on funds investing in crypto and virtual financial assets. The digital asset class is here to stay and it has a lot of potential going forward, he added.

‘You only need to look at David Swensen’s, who is considered by many to be the world’s best asset allocator, recent commitment of $400 million of the Yale Universities Pension fund to the sector, to see where it is going.’

As a new asset class, a major concern is that there are few strategies to choose from, with 94 listed funds trading globally, 160 funds in total and three fund of funds targeting the space. This means that strong manager selection is critical for success when it comes to accessing the theme, he said.

Despite the asset class being in its infancy, it is important that allocators pay attention to these emerging trends and ‘alternative alternatives,’ helping to pioneer innovation, Khan-Roper explained.

‘Cryptocurrencies are here to stay and, as a CIO, I believe that we are obligated to investigate all asset classes rather than simply sitting on the side lines. Only then can you make a truly insightful judgement call.

‘What I would say is that it is rare in someone's career that something with as much opportunity exists and it’s great to see much needed liquidity being placed into the bottom end of the market through the growth of the ICO industry.’