By Zhang Ran (China Daily)
Updated: 2007-11-17 09:14

Alternative investment - investment in assets other than traditional stocks and bonds - would become one of the fastest-growing global investment trends of the next decade, Deutsche Bank's global investment arm RREEF said in a report released on Friday in Beijing.

Combining real estate, infrastructure, private equity and hedge funds, alternative investment has proven to deliver higher returns than the traditional offerings of stocks and bonds over the past 10 years, said RREEF's chief economist and strategist Asieh Mansour, who authored the report.

She explained that recent turmoil in credit markets and heightened volatility in equity markets have spurred institutional investors and high net worth individuals to seek out alternative investments.

"Equity market upheavals and the continuation of low bond yields worldwide reinforce the need for investors to have a diversified portfolio across all kinds of asset classes in order to enhance returns and reduce volatility," Mansour said. "Moreover, returns from equity and bonds are expected to be less significant over the next decade."

Haitong Securities analyst Zhang Qi agreed, adding that alternative investments would also lead China to a new paradigm of commerce.

"The increasing volatility of the mainland stock market, the underdevelopment of a bond market, as well as speculation on the yuan's appreciation, offered more opportunities for alternative investments here in China," he said.

Recent statistics from Zero2IPO, a local private equity and venture capital research firm, showed that private equity investment in China continued to rise in the third quarter. Figures show 38 private equity funds invested a combined US$3.5 billion in 43 Chinese enterprises, an increase of 43.8 percent from the second quarter and of 36.3 percent over the same period last year.

Alternative investment companies, such as RREEF, have been actively investing in the country. The firm currently manages US$1 billion in alternative investment assets in China, much of which comes from the real estate sector.

In June, RREEF raised about HK$2.2 billion in real estate investment trusts (REIT) overseas to invest in an 25-tier commercial-use building in Beijing. This is the second Hong Kong-listed REIT to be invested on the mainland, after the GZI Real Estate Investment Trust.