Assets managed by the top 100 alternative investment managers reached $3.5 trillion (€3.1 trillion) globally last year – up from $3.3 trillion the year before.As the number was ahead of assets invested in exchange-traded funds (ETFs), which are considered mainstream, then the question might be: are so-called alternatives all that alternative any longer?
This is a question posed by consultancy Towers Watson in its The Global Alternatives Survey, a paper that shows that real estate alone has over $1 trillion invested in it by the largest 100 alternative managers.
Real estate managers account for the largest share of alternative assets under management (33%), followed by hedge funds (23%) and private equity fund managers (22%).
And that’s just the top 100 managers. Outside of the largest 100, the total figure of alternative assets under management rises to $6.3 trillion (based on 623 entries) and assets are invested in broadly the same percentages as the top 100.
Luba Nikulina, global head of investment manager research at Towers Watson, says: “Institutional investors continue to plough billions of dollars annually into investment opportunities other than bonds and equities, [and alternatives] are now increasingly seen as ‘bread and butter’ assets, rather than alternative assets.”
While alternatives may now be part of the mainstream, Nikulina is keen to point out that not “all alternatives are created equal”. This is to say that some alternatives are very complex and require high governance, such as hedge funds and private equity, while others can be more straightforward, such as real estate and illiquid credit.
North America is the largest destination for alternative capital (47%), with infrastructure and illiquid credit as the exceptions, where more capital is invested in Europe.
Nikulina predicts that alternatives will continue to grow as investors continue to diversify and seek alpha away from traditional sources, such as long-only equity. The number of managers active in the alternatives area has more than tripled in the past five years.
Exchange-traded products, which include ETFs, broke through the $3 trillion milestone in May, according to ETFGI.
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