He describes this as a relatively large allocation, although it is slightly lower than in previous years.

Last year GAM, which manages Tower’s Global Gateway Fund, invested about one third of its portfolio in this asset class, which produced a return of 13.6% (in US dollars).

"The relatively large allocation reflects the ongoing high level of confidence which we have in the asset class.

This is based on the excellent results which have been produced over the long run, as well as in more recent years, including 2003."

One of the most attractive investment characteristics of the alternative investments asset class is its proven ability to post positive investment returns regardless of the general direction of equity and bond markets.

"This is clearly evident in the results produced not only through the high equity return phase of the 1990s, and indeed this most recent year, but also more importantly during the sharp three-year downturn in equities until March 2003."

He says it is important to avoid the temptation to allocate even larger amounts to alternative investments.

"As with all well- performing assets, it is not without risks nor is it necessarily the only or best performing asset class available in which to invest at any given time.

"On the risk front, there are examples, such as in 1994, and indeed for a period last year amid the reversal in bond yields, when losses were experienced by both individual managers as well as the asset class generally."

He says that at certain stages of the investment cycle, other assets will produce better results and should not be excluded from our allocations.

For more on the Global Gateway Fundclick here