Context Summits Poll: Demand Rising for Alternative Assets and New Strategies

Apr 21 2017 | 10:34pm ET

Institutional investors are broadly maintaining their commitments to the alternative investment industry and nearly three-quarters plan to increase their allocations this year, according to a new survey by Context Summits. 

The new research, contained in the company’s second annual Allocator Trends Report, features data from more than 200 institutions and family offices representing prominent fund of funds, endowments, pensions, sovereign wealth funds and private investors who attended Context Summits Miami 2017 in early February. In total, Context Summits Miami 2017 convened more than 2,000 industry professionals, representing $3.1 trillion in cumulative assets under management.

Key highlights from the report:

  • Allocators Increasing Allocations to New Alternative Asset Managers: Institutions and family offices are maintaining their commitments to alternative asset managers, continuing a trend from 2016 when 79% of allocators increased their overall allocation to alternatives. In 2017, 72% of investors plan to increase their allocations to alternative fund managers.
  • Despite Challenging Market, Investors Putting More Capital to Work: More than two out of three investors (68%) surveyed intend to decrease their cash position by the end of the year, a higher percentage than in 2016 (62%), indicating a willingness to remain invested in the market. At the same time, 2016 was a turbulent year for markets, highlighted by two low probability events: the surprise Brexit and Trump votes.
  • Investors Remain Optimistic on the Industry's Ability to Generate Strong Risk-adjusted Returns: More than half (51%) of allocators hold a positive outlook on the alternative asset management industry for 2017, with an additional 36% of survey respondents taking a neutral stance.
  • Allocators Favor Emerging Managers Over Established Managers: A majority of allocators (59%) prefer to allocate to emerging managers rather than established managers, indicating a willingness to consider new ideas and strategies.
  • Key Drivers for Evaluating Fund Managers: The top three drivers for evaluating fund managers were Investment Process, Performance and AUM. The three least important drivers were Redemption/Lockup terms, Operations and Track Record Length.
  • Performance Expectations Still Sky-High: Despite the willingness to take on less established managers, allocators are seeking high annualized returns, 10.9 percent on average for hedge funds, according to investor respondents.
  • Investors Split on Greatest Market Headwinds: Investors identified regulatory uncertainty, the new presidential administration and volatility in global markets as among the greatest market challenges in 2017.

"For the second consecutive year, one of the overarching themes from our Miami event is that institutions and family offices are maintaining their commitment to alternative asset managers," said Mark Salameh, co-founder and CEO of Context Summits, in a statement. "These investors are seeking new managers that can produce strong risk-adjusted returns and help diversify a traditional portfolio from risks in equity and credit markets. The findings provide evidence that the alternative asset management industry continues to grow and mature, with new strategies and ideas entering the market every day."

Founded in 2013, Context Summits hosts a series of alternative investment industry events each year. The company is part of Context Capital Partners, an alternatives specialist founded in 2005 whose subsidiaries offer a diverse range of investment strategies, including hedge funds, liquid alternative mutual funds, and private equity funds. 

In addition to Context Summits, the firm’s business units include Context Jensen Partners, Context Asset Management, Context BH Capital Management, Context Liberty Bell, Titan Capital Management and Adams Business Credit. Since inception, Context has led hedge fund seed deals totaling more than $400 million.

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