Alternatives now used by 80% of instos
Monday, 14 March 2016 1:00pm

Nearly eight out of 10 global institutional investors now invest in alternative assets, according to research from Preqin.

The latest 'Preqin Investor Outlook: Alternative Assets, H1 2016' finds that investors are mixed in their attitudes to the alternative assets industry.

An increasing proportion of investors now hold significant target allocations for alternatives. Forty-two per cent of private equity investors, 48% of real estate investors, and 66% of hedge fund investors have target allocations to the asset class of more than 10%.

Only 5% of institutional investors currently invest in all alternative asset classes.

Nearly two-fifths (38%) of investors with hedge fund exposure have a negative view asset class versus roughly a third (32%) who are positive, the research stated.

Private equity and real estate have returned record amounts of capital to investors in recent years, and accordingly 39% of real estate investors and 30% of private equity investors feel their expectations have been exceeded, while only 11% and 6% respectively feel their expectations have not been met.

The survey also found that, 32% of hedge fund investors and 41% of natural resources investors plan to allocate less capital to those asset classes over the next 12 months. A smaller proportion (25% and 24% respectively) plan to allocate more.

In the longer term, investors to all asset classes plan to increase their allocations. However, a significant 23% of natural resources investors and 26% of hedge fund investors plan to decrease their allocations, more than in any other asset class.

"The alternative assets industry continued to grow in 2015, with fund managers now managing an all-time record $7.4 trillion. This increase in assets has been driven by expanding investor demand, as institutions globally look to further diversify their portfolios with an ever-wider range of asset classes to generate strong returns, reduce volatility, act as an inflation hedge and deliver reliable income," Preqin chief executive Mark O'Hare said.

"However, investor sentiment is not uniformly positive about alternative assets. Although many investors plan to increase the amount of capital they invest in asset classes like private equity or infrastructure, a significant proportion plan to limit their commitments to natural resources and hedge funds.

"In this challenging fundraising environment, fund managers will have to be able to respond to investor concerns in order to attract fresh capital."

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