United Kingdom, Canada, Ireland
LONDON, Monday 14 July 2014 - Total assets managed by the Top 100 alternative investment managers globally reached $3.3 trillion in 2013 ($3.1 trillion in 2012), according to research produced by Towers Watson and published in conjunction with the Financial Times. The Global Alternatives Survey, which covers seven asset classes and seven investor types, shows that of the Top 100 alternative investment managers, real estate managers have the largest share of assets (31% and over $1 trillion), followed by private equity fund managers (23% and $753 billion), hedge funds (22% and $724 billion), private equity funds of funds (PEFoFs) (10% and $322 billion), funds of hedge funds (FoHFs) (5% and $173 billion), infrastructure (4%) and commodities (2%).
The research, which this year itemises real assets1 and illiquid credit for the first time, also includes the top-ranked managers, by assets under management (AuM), in each area. Data from the broader survey shows that total global alternative AuM is now $5.7 trillion and is split between the asset classes in broadly similar proportions to the Top 100 alternative investment managers, with the exception of real estate, which falls to 24% and hedge funds which increases to 27% of the total.
Craig Baker, global Chief Investment Officer at Towers Watson, said: “For almost all of the past eleven years of this research we have seen increasing allocations to alternative assets by a wide range of investors. Not only has the appeal of alternative assets broadened to include many more insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond the likes of hedge funds and infrastructure to include real assets, illiquid credit and commodities. It is therefore not surprising that allocations to alternative assets by pension funds, for example, now account for around 18% of all pension fund assets globally, up from 5% fifteen years ago.”
The research - which includes data on a diverse range of institutional investor types - shows that pension fund assets represent a third (33%) of the Top 100 alternative managers’ assets, followed by wealth managers (18%), insurance companies (9%), sovereign wealth funds (6%), banks (3%), funds of funds (3%) and endowments and foundations (3%).
Craig Baker said: “Pension funds continue to search for new investment opportunities and alternative assets have been an area where they have made, and continue to make, very significant allocations. While remaining an important investor for traditional alternative managers, pension funds are also at the forefront of investing in new alternatives, for example in real assets and illiquid credit. But they are by no means the only type of institutional investor looking for capacity with the top alternatives managers. Demand from insurers, endowments & foundations and sovereign wealth funds is on the up and only going to increase in the future as competition for returns remains fierce.”
The research shows that for the Top 100 managers, North America continues to be the largest destination for alternative capital (45%), with infrastructure as the only major exception where more capital is invested in Europe. Overall, 38% of alternative assets are invested in Europe and 7% in Asia Pacific, with 10% being invested in the rest of the world.
In the ranking of Top 100 asset managers by pension fund assets, these increased by nearly 2% from the year before to reach nearly $1.4 trillion. Real estate managers continue to have the largest share of pension fund assets with 35%, followed by PEFoFs (20%), private equity (15%), hedge funds (12%), infrastructure (8%), FoHFs (7%), illiquid credit (2%) and commodities (1%).
Craig Baker said: “Pension funds globally continue to put their faith in diversity via increasing alternatives assets to help deliver more reliable risk-adjusted returns at the total fund level. This is evidenced by the growth, significant in some instances, in all but one of the asset classes in the past five years. Most of the traditional alternative asset classes are no longer really viewed as alternatives, but just different ways of accessing long-term investment themes and risk premia. As such, allocations to alternatives will almost certainly continue to increase in the long term, but are more likely to be implemented directly via specialist managers rather than funds of funds; although funds of funds will also continue to attract assets, as borne out by this research.”
Data from the wider survey shows that at the end of 2013, the top 25 alternative asset managers of wealth management assets managed $426bn (similar to 2012), followed by the top 25 managers of insurance company assets ($275 billion – up by 13%); the top 25 managers of sovereign wealth fund assets ($153 billion – roughly the same); the top 25 managers of bank assets ($124 billion – down by 23%); the top 25 managers of fund of fund assets ($100 billion – down by 16%); and the top 25 managers of endowment and foundation assets ($83 billion – up by 15%).
Craig Baker said: “Throughout the crisis, investors continued to move away from simply holding equities as their main growth asset and to make greater use of alternative assets; and we expect this to continue in the future. We think the effort to diversify in this way is worthwhile but investors need to be cautious about choosing the best and most efficient vehicles, not forgetting the increasing number of cheaper and lower governance routes for improving investment efficiency such as using smart beta - notably in the alternatives space.”
According to the research, Macquarie Group is the largest infrastructure manager with $96bn and tops the overall rankings, while Blackstone ($70 billion) is the largest real estate manager. The Goldman Sachs Group is the largest private equity manager in the ranking on $60 billion with Carlyle Solutions Group as the top PEFoF manager with $48 billion. Blackstone is the largest FoHF manager with $54 billion, while Bridgewater Associates is the largest hedge fund manager with $87 billion. BlackRock is the largest commodities manager with $53 billion, M&G Investments is the largest illiquid credit manager with $31 billion and the largest manager of real assets is EII Capital Management with $11 billion.
1 Real assets strategies include a wide range of investment opportunities i.e. in agriculture, farmland, timberland, water (including water rights), natural resources, etc. The distinctive characteristic of real assets is tangible underlying assets and their connection to the food and resource-scarcity theme.
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* Data derived from the Global Billion Dollar Club, published by HedgeFund Intelligence
** Figures show total capital raised since inception, obtained from publicly available sources
*** Figures show total assets under management, obtained from publicly available sources
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* Figures for some of these managers were obtained from publicly available sources and using data derived from the Global Billion Dollar Club, published by HedgeFund Intelligence
Towers Watson conducted this survey for the year to December 2013 to rank the largest alternative investment managers and includes 589 investment manager entries comprising: 85 in real estate, 66 in fund of hedge funds, 55 in private equity fund of funds, 162 in hedge funds, 90 in private equity, 55 in infrastructure, 32 in commodities, 24 in illiquid credit and 20 in real assets. For real estate, commodities and infrastructure, individual managers are included. The majority of the data (531 entries) comes directly from investment managers with the remainder coming from publicly available sources. Certain individual hedge fund information was sourced from the Global Billion Dollar Club, published by HedgeFund Intelligence. All figures are in US$.
Towers Watson's Investment business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 800 associates worldwide, assets under advisory of over US$2 trillion and over US$65 billion of assets under management.
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world.