Globally, alternative investments crested $4.9 trillion

The top 100 alternative investment managers globally manage assets exceeding $3 trillion. According to the Global Alternatives Survey, produced by Towers Watson in conjunction with Financial Times, shows that of the top alternative investment managers, real estate managers have the largest share of assets or $1.1 trillion, followed by private equity managers, $696 billion, hedge funds, $643 billion, private equity fund of funds, $288 billion), fund of hedge funds, $187 billion, infrastructure, $119 billion, and commodities, $101 billion.

The research also found that total global alternative assets under management are now $4.9 trillion and are split between asset classes in similar portions as the Top 100 investment managers.

“The ongoing global economic crisis has driven all types of institutional investors toward having more diversified investment portfolios, with investment managers offering significant alternative capabilities being the clear beneficiaries. Notably, allocations to alternative assets now account for 20 percent of all pension fund assets globally, up from 5 percent 15 years ago,” said Craig Baker, global head of research at Towers Watson Investment.

The research includes a diversified range of institutional investors outside of pension funds and shows that pension fund assets represent a third of the Top 100 alternative managers’ assets, followed by insurance companies, sovereign wealth funds, and endowments and foundations.

North America is the largest destination for alternative capital (48 percent), with infrastructure the only exception, with more capital invested in Europe. Overall, one-third of alternative investments are invested in Europe, one-tenth in Asia Pacific, and 5 percent invested in the rest of the world.

During 2011, pension fund assets increased by around 8 percent from the year before, to $1 trillion, and represent over half of all assets managed by the Top 100 alternative investment managers. Real estate managers continue to have the largest share of this, with 52 percent, followed by PEFoFs (23 percent), infrastructure (11 percent), FoHFs (11 percent) and commodities (3 percent). When including pension fund assets managed by individual hedge funds and private equity, the research shows that assets increased to US$1.2 trillion, and the split between asset classes for the Top 100 managers changes to real estate managers (40 percent) followed by PEFoFs (18 percent), private equity (14 percent), hedge funds (10 percent), infrastructure (9 percent), FoHFs (8 percent) and commodities (2 percent).

“The trend toward larger allocations to alternatives by pension funds is likely to continue, but the way investors access them is already changing. While pension funds currently have more exposure to funds of funds than any other investor group, this exposure is declining as individual managers — particularly hedge funds and private equity — improve their structures and are seen as a more efficient implementation route than funds of funds vehicles,” Baker said.


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