Wednesday, 30 July 2014
Last updated 9 hours ago
Jan 21 2014 | 9:01am ET
The alternative assets industry added over $600 billion in assets under management in 2013 and now oversees some $6 trillion, according to data provider Preqin.
The research firm's 2014 Global Alternative Reports show significant growth in assets held by private equity, hedge fund, real estate and infrastructure fund managers in 2013.
The figures follow a year of “improving exit environments, strong performance and increased fundraising levels, all stemming from even greater appetite for alternatives from investors,” said Preqin, adding that more than 80% of investors in each asset class felt their investments had either met or exceeded expectations over the previous 12 months, and over 30% intend to increase their allocations over the next 12 months.
Private equity assets under management stood at $3.5 trillion as of June 2013 (including private real estate and infrastructure funds), up from $3.2 trillion as of June 2012. Private equity funds raised $454 billion in 2013, the largest total post-financial crisis, although first-time fund managers accounted for a historically low 7% of that total. A full 71% of p.e. investors intend to commit to their next private equity fund within the next year.
Hedge funds saw the highest year-on-year growth in assets, from $2.30 trillion to over $2.66 trillion, as a result of strong investment gains and new asset flows. Institutional investors now account for 66% of all hedge fund capital, with all major groups of institutional investors increasing their hedge fund allocations between 2012 and 2013. Moreover, although the average hedge fund lagged the S&P500 in 2013, returning 11.08%, a record-high 84% of investors said their returns had met or exceeded expectations.
The real estate industry saw its strongest fundraising since the financial crisis in 2013 and managed $657 billion as of June 2013—up from $576 billion a year earlier. Real estate was the best-performing asset class in public pension funds’ portfolios over the three years to June 2013, posting average returns of 13.7% and surpassing the average 13.6% returns on listed equities. Preqin says 31% of institutional real estate investors are looking to increase their allocations to the asset class over the next 12 months, with only 5% intending to reduce their exposure.
Infrastructure assets are at a record high of $244 billion as of June 2013, up from $210 billion a year earlier. Just under half of institutional investors in infrastructure (46% ) are looking to increase their allocations to the asset class over the next 12 months, a larger proportion than in any other alternative asset class. And of those planning to reinvest, 43% expect to allocate $100 million or more.
“The alternative assets industry is now valued at over $6 trillion, according to Preqin’s latest estimates,” said Preqin CEO Mark O’Hare in a statement, “and all signs indicate this figure will continue to grow. In speaking with investors, we have found that many institutions not only have significant allocations to the private equity, hedge fund and real assets sectors, but many are looking to invest even more capital in these asset classes in the near future.
“Performance has been a key component of this growth. The alternative assets industry has continued to demonstrate it can offer superior long-term risk-adjusted performance for investors, as well as offering key diversification opportunities or reducing volatility. With the fundraising environment in 2013 indicating the strong demand investors have for these investments, coupled with the positive intentions gleaned from speaking with investors, Preqin anticipates even further growth for the alternative assets industry throughout 2014.”
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…