Alternative Assets Top $5.7 Trillion

Oct 7 2014 | 11:02am ET

Total global alternative assets under management have hit $5.7 trillion, according to new research from Towers Watson.

In its latest Global Alternatives Survey, the data provider examines seven alternative asset classes—hedge funds, private equity, real estate, infrastructure, commodities, real assets and illiquid credit, the latter two appearing for the first time this year.

The survey found that the top 100 alternative investment managers together managed $3.3 trillion.

Within this top 100, real estate managers accounted for the largest share of assets under management (over $1 trillion or 31%), followed by private equity managers ($753 billion or 23%), hedge funds ($724 billion or 22%), private equity funds of funds ($322 billion or 10%) and funds of hedge funds ($173 billion or 5%). Infrastructure managers accounted for 4% and commodities managers for 2%.

The broader survey, which covers 589 asset managers, shows a similar breakdown in AUM, except that real estate's share falls to 24% and hedge funds' share rises to 27%.

“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,” said Brad Morrow of Towers Watson in a statement. “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. So it is not surprising that allocations to alternative assets by pension funds, for example, now account for around 18% of all pension fund assets globally, up from 5% 15 years ago.”

The report shows that pension fund assets account for 33% of the top 100 alternative managers' AUM, followed by wealth managers (18%), insurance companies (9%), sovereign wealth funds (6%), banks (3%), funds of funds (3%), and endowments and foundations (3%).

“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,” said Morrow. “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 alternative managers. Demand from insurers, endowments and foundations, and sovereign wealth funds is on the rise and only going to increase in the future as competition for returns remains fierce.”

North America is the destination for 45% of alternative capital, although more infrastructure capital is invested in Europe. Overall, 38% of alternative assets are invested in Europe, 7% in Asia Pacific and 10% in the rest of the world.

In the ranking of top 100 asset managers by pension fund assets, these increased by nearly 2% from the year before to reach nearly $1.4 trillion. Real estate managers continue to have the largest share of pension fund assets, with 35%, followed by PEFoFs (20%), private equity (15%), hedge funds (12%), infrastructure (8%), FoHFs (7%), illiquid credit (2%) and commodities (1%).

Macquarie Group was the largest infrastructure manager, with $96 billion, and also 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 ranking, with $60 billion, and Carlyle Solutions Group is the top PEFoF manager, with $48 billion. Blackstone is the largest FoHF 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 ($31 billion), and the largest manager of real assets is EII Capital Management, with $11 billion.

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