According to figures from ACAFI (Chilean Association of Investment Fund Administrators), as of March 2022 there were more than 690 Investment Funds, of which more than 140 correspond to investments in Alternative Assets. These are the assets with the highest growth in recent years, with an average rate of 30% in the number of funds. This strategy currently manages more than 5.4 billion dollars, being an important driver of the local economy, providing financing to companies (SMEs) and individuals who do not have access to traditional financing. The Alternative Funds in their different structures allow financing from housing, through Mutual Mortgages (Long Term); to liquidity to companies, through advances on invoices.

Where to Invest?

In order to choose an investment instrument, each person should primarily evaluate how long he/she needs to remain invested for. time he/she needs to remain invested, i.e., whether the investment is short, medium or long term.that is, whether the investment is short, medium or long term. It is also necessary to evaluate his or her capacity to take risk and at the same time if that risk has the reward reflected in the profitability of the instrument. In the current scenario, it has also become relevant to look at other factors, such as analyzing how indexed the assets are to inflation or whether the assets are local or international. Investors also evaluate variables such as the social impact of the Funds or even whether the investments are in "green" assets, or have an environmental improvement component.

How to evaluate Alternative Assets?

Evaluating the assets of a Fund is not an easy task from an investor's point of view, Therefore, one of the relevant aspects in the first instance is to know the manager and that he/she conveys knowledge of the assets under management, i.e., to know that he/she has a good knowledge of the assets under management, to know that he/she has a track record track record with this type of instruments. On the other hand, it is also important to know the investment team and their experience.

Within each Alternative Asset Fund, one should be able to look at or ask to know from the manager the investment or asset selection process. should be able to look at or ask to know from the manager the investment or asset selection process, which should consider some minimum steps for decision making on which assets to invest in such as, for example:

• Analyze the debtor's (issuer's) payment capacity, its main financial and external performance indicators. It is the first source of payment of the asset.
• Analyze whether there is other collateral, such as real estate or an overweighting of assets, which would allow for a better debt-collateral ratio; this would be a second source of payment in the event that the first one has any type of difficulty. 
• Analyze whether it has any other type of collateral, such as insurance policies, securitization or government guarantees, which would be a third source of payment.
• Additionally, it is important to analyze the financial indicators of the Fund, or of the instruments, that contain some detail of the status of the investment portfolio, such as liquidity indicators, payment behavior (default) or concentrations, but these indicators must be related to the nature of the instruments.

In all decision making and especially in those related to investments, there are always quantitative and qualitative components to evaluate, that is why it is also relevant to be able to count on an expert advice, which can help to guide us in the decision making process or provide us with a wider range of investment alternatives in a shorter time. relevant to be able to count on an expert advice that can help guide us in the decision making process or provide us with a wider range of investment alternatives in a shorter period of time.

Cristián Rodríguez P.

Private Debt Manager

AGF Team