Alternative assets under management (AuM) grew to almost $6.5 trillion (€5.5 trillion) globally over 2016, a survey published today found.
The largest 100 alternative asset managers invested the lion’s share, $4 trillion, according to the latest ‘Global Alternatives Survey’ by consultancy Willis Towers Watson.
The firm described the growth of alternatives as “unstoppable” and noted strong demand for illiquid credit and a reduction in hedge fund allocations.
Bridgewater Associates was the largest manager in terms of overall assets under management, with over $116 billion invested in direct hedge funds.
TH Real Estate was the largest real estate manager globally, with more than $105 billion in assets, and Prudential Private Placement Investors was the most significant illiquid credit manager with nearly $81 billion under management.
Over half of alternative asset manager allocations were in North America and over a third in Europe.
Of the top 100 alternative investment managers, real estate managers had the largest share of assets (35%, or over $1.4 trillion), followed by private equity fund managers, hedge funds, private equity funds of funds, illiquid credit, funds of hedge funds, infrastructure and commodities managers.
In percentage terms, iIliquid credit saw the largest increase over the 12-month period. The 102% increase meant AUM in the sector rose from $178 billion to $360 billion.
The research looked at the distribution of assets within the top 100 alternative asset managers by investor type and found that pension fund assets accounted for over a third, with assets of $1.6 trillion at the end of 2016, up 9% compared to the end of 2015.
Illiquid credit allocations for this group doubled to 8% over the 12 months, though real estate managers continued to have the largest share of pension fund assets with 41%.
Luba Nikulina, global head of manager research at Willis Towers Watson, said: “As capital supply and competition have increased in some segments of the illiquid credit universe, such as direct lending for example, yields are not always offering sufficient compensation for illiquidity and risk.”
But Nikulina also said hedge funds had seen assets leave them.
“At the same time, we have seen some withdrawal of capital from hedge funds in the face of high fees, skewed alignment of interests and performance headwinds. It appears that the growing groundswell of negative sentiment that has arisen due to the aforementioned issues is now showing up in the decisions of asset allocators.”
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