WAM's Nick Kelly on the "free lunch" on offer from alternative assets

Please note this interview was filmed on 30 June 2026. 

The only thing approaching a free lunch in investing is diversification, says Wilson Asset Management's Nick Kelly. 

With the extreme levels of concentration we're currently seeing in equities markets, it's the most important meal of the day right now for investors. 

In this context, the diversification offered by alternative assets isn't just a free lunch - it's more akin to all-you-can-eat buffet. 

One need only look at the month of March, says Kelly, where the All Ordinaries was down almost 8%, while WMA was up almost 1%. 

According to Kelly, that demonstrates "the different return drivers that you get access to in alternatives and why you want to own alternatives within a diversified portfolio."

And that's the opportunity WAM and Kelly are looking to maximise. The WAM Alternative Assets LIC (ASX: WMA) is the only LIC on the ASX that offers access to a diversified portfolio of alternative assets, and the firm is also launching a new real assets fund, the Wilson Asset Management Real Asset Fund (RAF). 

In this interview, Kelly makes the case for alternative assets, explains the key advantages and drawbacks an alternatives manager has over an equities manager and tackles the big questions facing private credit.

Real assets, real opportunity

One of the big advantages for alternative asset managers is the breadth of asset classes on offer, something equities managers simply don't have. 

"We don't have to fall in love with our asset class," Kelly says. "If we don't like something, we can pivot and move to one of the asset classes within that private markets bucket."

But there's also a tradeoff to that natural diversification, he says.

"We just think real assets look particularly attractive at this point in the cycle," says Kelly.

Unlisted real estate is a particular promising part of the market, where years of slow growth has created good buying opportunities, he says. "We're seeing opportunities in logistics, living, life sciences, commercial office and other sectors. We're able to acquire high quality properties from motivated sellers."

Infrastructure is another attractive opportunity given the current macro conditions. 

"Infrastructure is a wonderful inflation hedge and tends to perform exceptionally well during high inflationary periods like we have at the moment," says Kelly. "It also offers very contracted cash flows and tends to be a bit more defensive and higher yielding."

RAF is also an opportunity for WAM to also bring a trust structure to an area of the alternatives market that has been underserved.

"We've seen a huge number of evergreen alternative funds come to the market, but a lot of them have focused on private equity and private credit," says Kelly.

Buying at a discount

WAM's alternative assets LIC, WMA, is currently trading at roughly a 15% discount to pre-tax NTA. That obviously presents a great potential opportunity for investors, says Kelly, even if accounting for that discount is the "magic question" they're always looking to answer. 

Part of it is due to legacy assets from when the portfolio was managed by Blue Sky Alternative Investments (WAM took over in October 2020), as well as many of the assets being at the bottom of the J-curve but now coming into what Kelly calls a "period of growth".

There's also been a high turnover in the shareholder register, and 70% of current investors have joined since WAM took over in 2020. 

The private credit question

It's hard to have a discussion about alternatives and private markets without the conversation turning PC (private credit).

The asset class has attracted more than its fair share of scrutiny, but the challenges facing Australian private credit are not the same as those facing the US market, and it's the latter that often attract the most negative scrutiny.

"The US market is a very different beast to the Australian market," says Kelly. 

The US is suffering a slight liquidity crisis, not a credit crisis, says Kelly, thanks to its exposure to software. Australian private credit, by comparison, is mostly in real estate, but that doesn't mean the local market is necessarily out of the woods itself.

"$250 billion has been raised and deployed into private credit in Australia. I'm not sure all of that's being deployed in a sensible way and I do think some of the cracks we're seeing will widen."

But he says the sector will benefit from increased ASIC scrutiny and improved transparency on fees and valuations.

"If everything's marked at par when you review a portfolio, that's a red flag," he says. "Not everything goes well. So that should be reflected in the marks undertaken by the manager and the valuations in their book."

Private credit does account for around 10% of the WMA portfolio, and Kelly says it helps provide the income that goes towards the dividend paid to investors. And it approaches private credit as it does any other asset - with a focus on experience, transparency and alignment. 

"It is a really important asset class and I think it will exist long term. I don't think it's going to disappear."

And ultimately all alternative asset classes have their role to play in delivering better outcomes for investors at a time when that's what's needed, says Kelly.