Strong growth prospects for alternatives despite pandemic

Confidence in alternative funds’ growth prospects has soared despite the Covid-19 pandemic, the 2021 Funds Europe Jersey survey reveals. Ninety-one percent of respondents to this year’s survey expect the alternatives sector to grow over the coming year.

Of those, 41% expect it to grow significantly and 5% anticipate exponential growth. 

This contrasts sharply with the results from last year’s survey, which was conducted at the start of the pandemic. Last year, only 68% of respondents expected growth and a significant minority – 12% – predicted that the alternatives sector would contract. Only 2% of respondents to this year’s survey anticipate a contraction in the sector. 

Confidence in alternatives’ long-term growth prospects is stronger still. Ninety-seven percent of respondents to this year’s survey expect growth over the next five years. Of these, almost 60% expect significant or exponential growth – with no one expecting the sector to contract. 

Even at the height of the pandemic last year, confidence in the long-term growth trajectory of alternatives was buoyant, with 83% of respondents anticipating growth. This in part reflects the secular global trend towards alternative asset classes in a persistently low-yield environment. 

“The key trend globally remains the increasingly strong allocation by investors to alternatives,” says Elliot Refson, head of funds at Jersey Finance. “There is no sign of investor appetite slowing down, and private equity is the main beneficiary.”

Assets in Jersey’s private equity and venture capital segment rose by 21% during 2020 to £164.6 billion. This was partly driven by a number of big-ticket funds coming to market through Jersey in 2020, according to Tim Morgan, chair of the Jersey Funds Association.

These figures compound strong historic growth in Jersey’s private equity and venture capital segment. “The assets under management of private equity grew by 153% by value over the past five years, and the number of individual funds doubled over the same period,” says Refson. 

Looking to the future, respondents to this year’s survey see infrastructure as the sector with the highest growth prospects. Ninety per cent of respondents expect the infrastructure sector to grow, with 56% predicting strong growth. Only 2% predict a sector contraction. 

The percentages anticipating growth are also high for the private equity (82%), real estate (70%) and credit/debt (69%) sectors. However, a majority (52%) expect only moderate growth in real estate, with just 18% of respondents predicting strong growth in this sector and 10% envisaging a contraction. 

Opinion on hedge funds’ growth prospects is mixed. Forty percent of respondents expect strong growth in the sector, but 18% anticipate a contraction – the highest negative number for any asset class. Survey respondents also predict growth in digital assets, structured products and ESG assets. 

Demand is expected to come increasingly from Asian emerging markets, while expectations for US demand have dipped slightly. Sixty-five percent of respondents expect high demand from Asia ex China compared with 52% last year, while 56% anticipate high future demand from the USA, compared with 59% last year. Forty-seven percent expect high demand from China. 

*The survey was conducted in association with Jersey Finance and full results are in our report “Alternatives Future Directions”.

© 2021 funds europe



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