The world’s largest money managers looked after alternative assets worth almost $1 trillion ($952 billion) for pension funds in 2010, according to new research from Towers Watson in conjunction with the Financial Times.
The 2010 total represents growth of 16% over 2009.
The Global Alternatives Survey included 271 investment managers: 71 in real estate, 70 in funds of hedge funds, 59 in private equity funds of funds, 27 in commodities and 44 in infrastructure. (Towers Watson says it focused on funds of funds for both p.e. and hedge funds because they have traditionally been of most interest to pension funds.)
The total AUM of these managers was up 12% to $1,904 billion in 2010 and half their assets are now pension fund assets.
The survey covered five alternatives asset classes: real estate; private equity fund of funds; fund of hedge funds; infrastructure and commodities and includes rankings of the top managers in each area.
Craig Baker, global head of research at Towers Watson Investment, said: “The trend away from equity-focused portfolios to more diversified structures is now well established as investors acknowledge the risks associated with an undiversified approach, particularly in light of ongoing economic uncertainty. Indeed, according to our research, allocations to alternative assets have continued to rise and now account for 19% of all pension fund assets globally, up from 5% 15 years ago.”
The study analyzed the top 100 alternatives managers and determined that real estate managers led the pack, accounting for about 55% of total assets; followed by private equity funds of funds, with 18%; funds of hedge funds with 12%; infrastructure with 12%; and commodities with 3%. Private equity funds of funds and commodities showed increases in assets under management from 2009, while the other categories declined or remained unchanged.
With regard to hedge fund investing, Baker said: “In the hedge fund area smaller investors continue to find fund of funds more suited to their governance arrangements, whereas in private equity they might be questioning the whole net-of-fees proposition. In addition, we are also seeing greater interest in the new alternative beta opportunities for improving investment efficiency that are now more widely available.”
The broader survey showed that 46% of alternative assets managed on behalf of pension funds in 2010 were invested in North America, 37% in Europe and 13% in the Asia Pacific region.
Macquarie Group is once again the largest infrastructure manager of pension fund assets with $60.3 billion and also tops the overall rankings, while HarbourVest Partners once again heads the private equity funds of funds table with $21.7 billion. Blackstone Alternative Asset Management again manages the largest proportion of fund of hedge funds assets on behalf of pension funds, with a total of $15.9 billion. Prudential Financial tops the real estate table with $42.0 billion while PIMCO retains the leading pension fund commodities manager position with $11.1 billion.