Global alternative assets hit $5.7 trillion, Towers Watson says

16 July 2014   Category: News, Asia, Global, USA, Europe   By Asia Asset Management

Global alternative assets topped US$5.7 trillion in 2013, according to a survey by Towers Watson, as pension funds globally strived for diversification by allocating more to this asset class.

The fund consultancy found that the top 100 alternative investment managers accounted for a combined alternatives AUM of $3.3 trillion at the end of last year, compared to $3.1 trillion in 2012.

Among seven investor types, real estate managers held the largest share of assets at 31%, or more than $1 trillion; followed by private equity managers (23% and $753 billion); hedge funds (22% and $724 billion); private equity fund of funds (10% and $322 billion); fund of hedge funds (5% and $173 billion); infrastructure (4% and $121 billion); and commodities (2% and $79 billion).

The research itemised real assets and illiquid credit for the first time this year. With the inclusion of these assets, data from the survey showed that total global alternatives AUM hit $5.7 trillion.

The split between the asset classes is a broadly similar proportion to the top 100 alternative investment managers, with the exception of real estate, which falls to 24%, and hedge funds, which increase to 27% of the total.

Richard Tan, head of private markets for Asia at Towers Watson, said: “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.”

The research also showed that allocations from pension funds represent a third of the top 100 alternative managers’ assets, followed by wealth managers (18%); insurance companies (9%); sovereign wealth funds (6%); banks (3%); fund of funds (3%); and endowments and foundations (3%).

Mr. Tan said: “Pension funds globally 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. While remaining an important investor for traditional alternative managers, pension funds are also at the forefront of investing in new alternatives, for example in real assets and illiquid credit. But they are by no means the only type of institutional investor looking for capacity with the top alternatives 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.”

In terms of individual alternative managers, Macquarie Group is the largest infrastructure manager with $96 billion in AUM, and tops the overall rankings, while Blackstone ($70 billion) is the largest real estate manager. The Goldman Sachs Group is the largest private equity manager in the rankings with $60 billion; while Carlyle Solutions Group is the top private equity fund of funds manager with $48 billion. Blackstone is the largest fund of hedge funds manager with $54 billion, while Bridgewater Associates is the largest hedge fund manager with $87 billion. BlackRock is the largest commodities manager with $53 billion, M&G Investments is the largest illiquid credit manager with $31 billion and the largest manager of real assets is EII Capital Management with $11 billion.