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Alternative managers soak up pension assets
08 July 2013
Demand from non-pension fund investors will rise in the future, according to Towers Watson
Assets of the top 100 alternative investment managers globally hit $3.1trn in 2012, according to research by Towers Watson.
The Global Alternatives Survey showed that total AuM of global alternative assets surpassed $5trn last year.
Of the top 100 alternative investment managers, real estate managers have the biggest share of assets (34% and more than $1trn) followed by direct private equity fund managers (23% and $717bn). Direct hedge funds make up 20%, private equity funds of funds 10%, funds of hedge funds 6%, infrastructure 4% and commodities 4%.
Pension fund allocations to alternative assets now account for 19% of all pension fund assets.
Pension fund assets comprise more than a third (36%) of assets of the Top 100 alternative managers. Wealth manager assets comprise 19%, insurance companies 9% and sovereign wealth funds 6%.
Craig Baker, global head of investment research at Towers Watson, said: “Pension funds have always been and will remain a very large investor group for top alternatives managers, but the demand from non-pension fund investors, such as insurers, endowments & foundations and sovereign wealth funds, is only going to increase in the future.”
The survey also showed that for the top 100 managers, North America is still the largest beneficiary of alternative capital at 46%. Infrastructure is the only case where more capital is invested in Europe.
Overall, 37% of alternative assets are invested in Europe. Just 10% is invested in Asia Pacific.
Pension funds are likely to increase their allocations to alternatives, said Baker. He also commented on the shift away from funds of funds to direct funds:
“In particular we expect a continuing shift towards investing via individual managers rather than funds of funds – particularly in hedge funds and private equity – as these managers improve their structures and are seen as a more efficient implementation route than fund of funds vehicles.”