Institutional investment in alternative assets is just another way of meeting required returns.
Who says? Towers Watson’s new global CIO, Craig Baker.
The latest survey of assets managed by alternative investment managers around the world from Towers Watson, published in conjunction with the Financial Times, shows that global alternative AUM reached $5.7 trillion last year. The survey covered seven asset classes and seven investor types.
The Global Alternatives Survey also found that, among the Top 100 alternative investment managers, real estate managers had the largest share of assets, at 31 percent and an AUM of more than $1 trillion.
Baker comments: “For almost all of the past 11 years of this research, we have seen increasing allocations to alternative assets by a wide range of investors. Not only has the appeal of alternative assets broadened to include many more insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond the likes of hedge funds and infrastructure to include real assets, illiquid credit and commodities. It is, therefore, not surprising that allocations to alternative assets by pension funds, for example, now account for around 18 percent of all pension fund assets globally, up from 5 percent 15 years ago.”
“Pension funds continue to search for new investment opportunities, and alternative assets have been an area where they have made, and continue to make, very significant allocations,” Baker continues. “But they are by no means the only type of institutional investor looking for capacity with the top alternative managers. Demand from insurers, endowments and foundations and sovereign wealth funds is on the up and [is] only going to increase in the future as competition for returns remains fierce.”
Baker also makes the point that “most of the traditional alternative asset classes are no longer really viewed as alternatives, but just as different ways of accessing long-term investment themes and risk premia.” That’s a welcome reminder that the primary objective of investment for any investor is to meet required returns. “As such, allocations to alternatives will almost certainly continue to increase in the long term.”
That’s all right, then.
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Richard Fleming is editor of The Institutional Real Estate Letter – Europe.
