Allocations to alternatives on the rise

Office buildingsThe largest 100 alternative investment managers worldwide reached assets under management of $3.1 trillion (€2.4 trillion) last year, up by 8% from the year before.

Real estate accounts for the largest share (34%) followed by direct private equity (23%) and direct hedge funds (20%).

Further down in the ranking are private equity funds of funds (10%), funds of hedge funds (6%), infrastructure (4%) and commodities (4%).

The Global Alternatives Survey by Towers Watson suggests that assets under management in the alternative investment sector, including those outside of the top 100, is now $5.1 trillion. The figure is divided in similar proportions to the figure for the top 100.

The two exceptions are real estate, which falls to 26% of the total, and hedge funds, whose share rises to 26%.

Craig Baker, global head of investment research at Towers Watson, says for almost all of the past ten years of this research there has been an increase in allocations to alternative assets by a wide range of investors.

“Not only has the appeal of alternative assets broadened to include insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond the likes of real estate and private equity to include direct hedge funds, infrastructure and commodities.”

Allocations to alternative assets by pension funds, for example, now account for around 19% of all pension fund assets globally. This compares to 5% from 15 years ago.

Baker adds that “the demand from non-pension fund investors, such as insurers, endowments and foundations, and sovereign wealth funds, is only going to increase in the future”.

©2013 funds europe