Last year, alternative assets managed on behalf of pension funds by the world’s largest 99 investment managers grew by 40% to US$822 billion from US$586 billion in 2006.
According to research by Watson Wyatt and Global Investor magazine, over half the top 99 managers are based in the U.S., while over a third are based in Europe. Real estate managers lead the ranking, occupying the top nine positions and accounting for 62% of the assets. Infrastructure and commodities remain smaller, but growing alternatives classes among pension funds with the top 10 managers in these areas being responsible for US$43bn and US$16bn of assets respectively.
Data from the survey showed that, at the end of 2007, the top 50 managers within the areas of real estate, fund of hedge funds and private equity fund of funds managed US$512 billion, US$146 billion and US$139 billion respectively.
Roger Urwin, global head of investment consulting at Watson Wyatt, said the movement of assets into alternatives has continued unabated despite the high fees and costs and the mixed ability of managers to deliver good performance.
“The trends we see are: more need for transparency, particularly the separate identification of alpha and beta; an increased focus on risk; and the increased appetite for direct investment in private equity and hedge funds,” he said.
In terms of managers included within the survey, AEW Capital Management is the largest real estate manager of pension fund assets in the world with US$47.4 billion, while HarbourVest Partners tops the p.e. fund of funds with US$20.1 billion. The survey also reveals that Blackstone Alternative Asset Management manages the largest proportion of fund of hedge fund assets on behalf of pension funds, with a total of US$15.4 billion.