Preqin: Alternative Asset Investors Concerned About High Valuations

Sep 7 2017 | 5:03pm ET

Alternative asset investors are increasingly concerned with high valuations, according to new information from data provider Preqin, as extended pricing presents a key challenge facing investment managers in the industry.

This concern crosses asset classes, Preqin’s research shows, and while investors are generally satisfied with recent portfolio performance, deal flow going forward is emerging as a prominent concern. Indeed, as dry powder has reached record highs across the private capital industry and more funds are seeking investment, it is becoming an ever-increasing challenge for investors to find attractive opportunities to which they can allocate capital. 

Highlights from Preqin’s Alternative Assets Investor Outlook: 

  • Seventy-eight percent of institutional investors currently invest in alternative assets, and 47% invest in three or more asset classes. The most-targeted asset classes are private equity and real estate, with 56% of investors involved in each respectively. 

  • Private equity and private debt are the most well-perceived asset classes: 58% of investors report feeling positive towards private equity, and 57% have a positive perception of private debt. 

  • Across most asset classes, a greater proportion of investors plan to increase their long-term allocations compared to those that will look to reduce them. However, 44% of hedge fund investors plan to reduce their longer term allocation, double the proportion that plan to increase it. Similarly, 13% of natural resources investors intend to commit less in the long term, on par with those which will look to allocate more (17%). 

  • The largest proportions of investors across all private capital asset classes stated high asset pricing as a key challenge facing the industry in the coming year. In particular, 86% of private equity investors and 72% of real estate investors cited valuations as a key concern in the months ahead. 

  • Hedge fund investors, meanwhile, cited performance (69%) and fees (56%) as their primary concerns. 
  • Across all asset classes, a greater proportion of investors are finding it harder to source attractive investment opportunities than are finding it easier. 

Preqin’s data is based on a survey of 540 institutional investors conducted in June 2017. 

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. The company's Hedge Fund Online service is a leading source of intelligence on the hedge fund industry, with performance information for over 16,000 hedge funds across strategies and geographies. More than 47,000 professionals in 90 nations use the company’s products. 

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