Alternative investments on the up
21 August 2015 New York
Image: Shutterstock
Alternative asset classes are seeing an increase in popularity, with 79 percent of institutional investors now investing in at least one, according to Preqin’s latest Investor Outlook report.
Private equity, hedge funds and real estate were the most popular alternative asset classes, with more than half of respondents having at least one of each in their portfolios.
The top reason for supporting hedge funds was diversification, and respondents also cited the low correlation to other asset classes and reduced portfolio volatility. For private equity, the top reason for investing was high absolute returns, followed by diversification and high-risk adjusted returns.
Investment in almost all asset classes is expected to increase over the next year; 42 percent of private equity investors, 38 percent of private debt investors and 36 percent of infrastructure investors said they are planning to invest more capital in to alternatives in the next 12 months than they have in the last 12.
On the other hand, about a third of hedge fund investors said they plan to invest less in alternatives in the next year, compared to 19 percent that plan to invest more.
Growth in investment is also expected to continue in the long-term, with 51 percent of private equity investors and 44 percent of infrastructure investors planning to allocate more capital to alternative asset classes.
More than 60 percent of investors in real estate, infrastructure and private debt expect returns on their investments. Of private equity investors just under 60 percent seek returns of at least 14 percent, and 15 percent were looking for returns of 20 percent or more.
The vast majority of respondents said they have either a positive or neutral view of each asset class. As many as 95 percent were positive or neutral about private equity and 94 percent were positive or neutral about real estate.
Most investors also believed that their interests were aligned with those of fund managers. Private debt and real estate investors had the highest level of satisfaction in this area, with 83 percent and 80 percent agreeing with this, respectively.
On top of this, respondents believe that fund terms are changing in their favour. This was true of 47 percent of hedge fund investors and 44 percent of private equity investors.
Preqin CEO Mark O’Hare: “It is clear that the institutional community remains confident in the ability of alternative assets to help them meet their return objectives. The majority feel returns are meeting or exceeding expectations and, as a result, a much larger proportion of investors plan to increase their exposure to alternatives than plan to reduce it.”
“There remains huge scope for the alternative assets industry to grow in future years, both as investors build up existing allocations, and as they also further diversify their portfolios to include a wider range of asset classes.”
The survey included respondents from 460 institutions, plus data from 12,500 investors. The majority, 43 percent, were located in North America, while 31 percent were European, 22 percent were from the Asia Pacific region, and 4 percent were located in the rest of the world.
Private equity, hedge funds and real estate were the most popular alternative asset classes, with more than half of respondents having at least one of each in their portfolios.
The top reason for supporting hedge funds was diversification, and respondents also cited the low correlation to other asset classes and reduced portfolio volatility. For private equity, the top reason for investing was high absolute returns, followed by diversification and high-risk adjusted returns.
Investment in almost all asset classes is expected to increase over the next year; 42 percent of private equity investors, 38 percent of private debt investors and 36 percent of infrastructure investors said they are planning to invest more capital in to alternatives in the next 12 months than they have in the last 12.
On the other hand, about a third of hedge fund investors said they plan to invest less in alternatives in the next year, compared to 19 percent that plan to invest more.
Growth in investment is also expected to continue in the long-term, with 51 percent of private equity investors and 44 percent of infrastructure investors planning to allocate more capital to alternative asset classes.
More than 60 percent of investors in real estate, infrastructure and private debt expect returns on their investments. Of private equity investors just under 60 percent seek returns of at least 14 percent, and 15 percent were looking for returns of 20 percent or more.
The vast majority of respondents said they have either a positive or neutral view of each asset class. As many as 95 percent were positive or neutral about private equity and 94 percent were positive or neutral about real estate.
Most investors also believed that their interests were aligned with those of fund managers. Private debt and real estate investors had the highest level of satisfaction in this area, with 83 percent and 80 percent agreeing with this, respectively.
On top of this, respondents believe that fund terms are changing in their favour. This was true of 47 percent of hedge fund investors and 44 percent of private equity investors.
Preqin CEO Mark O’Hare: “It is clear that the institutional community remains confident in the ability of alternative assets to help them meet their return objectives. The majority feel returns are meeting or exceeding expectations and, as a result, a much larger proportion of investors plan to increase their exposure to alternatives than plan to reduce it.”
“There remains huge scope for the alternative assets industry to grow in future years, both as investors build up existing allocations, and as they also further diversify their portfolios to include a wider range of asset classes.”
The survey included respondents from 460 institutions, plus data from 12,500 investors. The majority, 43 percent, were located in North America, while 31 percent were European, 22 percent were from the Asia Pacific region, and 4 percent were located in the rest of the world.
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