New Resource: The Clearwater Guide to Alternative Assets

Institutional investors continue to embrace alternative asset classes in an effort to diversify their portfolios and chase yield.

A recent Clearwater poll of institutional investors found more than 70% of those polled invested in credit (private debt/banks loans/CLOs) and private equity. About 68% invested in real estate, and nearly 40% invested in hedge funds and infrastructure.

Based on the increased interest in alternative assets, Clearwater published a new resource available to help investors understand the accounting and reporting considerations for 17 different asset types. From convertible bonds to swaps, Clearwater’s guide covers a range of the most common alternative asset types. We’ve also included two RBC factors matrices.

You can download the guide in our Knowledge Center here.

Alternative Assets to Know

As part of our ongoing market research, Clearwater surveyed insurance investment professionals in 2015 and again in 2021 to see how their investments in alternative assets had changed. In both years, insurers were most invested in private placements, private funds, and mortgage loans. There were five asset classes that saw significant growth in the percentage of insurers invested, including private placements and syndicated loans.

Private placements came out on top in our survey with 62% of respondents invested in private placements. Private placements are securities (for the purposes of our asset class guide, defined as privately placed corporate debt) that are exempt from SEC disclosure and registration requirements, per Regulation D of the 1982 amendment to the Securities Act of 1933. Private placements are typically limited to sophisticated institutional investors such as banks, pension funds, or insurance companies.

Syndicated loans, also known as bank loans, are private placement securities that are generally senior debt secured by borrower assets. Syndicated loans are not required to be registered by SEC. This allows issuers to borrow outside the traditional parameters of fixed-income securities. About 30% of insurers surveyed in 2021 invested in syndicated loans compared to about 15% in 2015.

Clearwater’s new Guide to Alternative Asset Classes includes the GAAP, STAT, and IFRS reporting requirements for these assets, as well as challenges and other characteristics to consider.

Clearwater for Alternative Investments

Because of their unique structure outside of traditional asset classes, alternative assets come with their own challenges for investment accounting and reporting. These challenges include the availability of data and the difficulty of aggregating that data. Investors may also find they have to account for and report on their alternative assets manually and outside of the systems they use for other aspects of their portfolios.

To address these challenges, Clearwater provides a full-service solution for alternatives that not only provides data aggregation, validation, reconciliation, and reporting for private funds (LPs), but also is fully integrated with Clearwater’s standard accounting, compliance, performance, and risk reporting modules. That means you have a single solution for both traditional and alternative assets within your portfolio.

To learn more about Clearwater’s solution for alternative investments, schedule a meeting to speak with one of our experts.