Preqin: Investors Diversify Alternative Assets Exposure

Feb 22 2017 | 3:43pm ET

Alternative investors have significantly increased their asset class diversity over the past year, according to new research from data provider Preqin, while satisfaction with private equity is at record levels. 

More than a third of investors have exposure to at least four alternative asset classes at the start of 2017, a significant increase from a year ago, while half now hold allocations to three or more, the company said in a statement. The observations, included in Preqin’s H1 2017 Investor Outlook: Alternative Assets, are based on a survey of 533 institutional investors conducted by Preqin in December 2016.

The poll revealed that 9% of institutions invest in all six alternative asset classes, a fifth have exposure to five or more, and over a third (34%) invest in four or more. A year ago, only a quarter of respondents invested in at least four asset classes, and just 13% had exposure to five or more separate markets. 

Other highlights from the report: 

  • Four-fifths of all institutional investors make commitments to at least one alternative asset class, a rise of 
one percentage point from H1 2016. 

  • Satisfaction with the private equity asset class is at record levels, with 84% of investors holding a positive 
perception of private equity, and just 3% viewing it negatively. 

  • Conversely, 43% of investors are dissatisfied with the hedge fund industry and 31% plan to decrease their 
allocation to the asset class over the longer term. 

  • Sixty-two percent of investors plan to increase their allocation to private debt over the longer term, while 53% of investors intend to do the same with infrastructure. 
  • Although 93% of investors felt that their real estate portfolio’s performance either met or exceeded expectations in 2016, over a third (37%) believe their portfolio will perform worse in the coming year, compared to just 9% that expect it to perform better. 

  • 22% of investors believe that it is now easier to identify attractive natural resources investment opportunities than a year ago, a far higher proportion than any other asset class. 

“Preqin’s investor surveys demonstrate the considerable appetite for alternative assets within the investor community, with many looking to ramp up their participation within these markets,” said Andrew Moylan, Preqin’s head of real estate products, in the statement. “It is notable that although the proportion of investors that are not involved in the alternatives industry has remained relatively consistent, those with exposure are now expanding and diversifying their exposure to different asset classes.” 

While the private equity and hedge fund markets are large, well-established industries, sectors such as unlisted infrastructure and private debt have seen robust expansion in the past few years,” Moylan added. “This has been driven by sustained investor appetite, in part due to these asset classes’ ability to outperform public markets over the long term.”

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. More than 40,000 professionals in 90 nations use the company’s products.

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