UAE. Assets managed by the Top 100 alternative investment managers globally now exceed US$3 trillion according to research produced by Towers Watson in conjunction with the Financial Times.
The Global Alternatives Survey which, for the first time includes individual private equity and hedge funds, shows that of the Top 100 alternative investment managers, real estate managers have the largest share of assets (35% and $1.1 trillion) followed by private equity managers (22% and $696bn), hedge funds (21% and $643bn), private equity fund of funds (PEFoF) (9% and $288bn), fund of hedge funds (FoHF) (6% and $187bn), infrastructure (4% and $119bn) and commodities (3% and $101bn).
The research also includes the top ranked managers, by assets under management, in each area. Data from the broader survey shows that total global alternative assets under management is now $4.9 trillion and is split between the asset classes in similar proportions to the Top 100 alternative investment managers, with the exception of real estate which falls to 28% and FoHF which increases to 9% of the total.
Craig Baker, global head of research at Towers Watson Investment, said: “The on-going global economic crisis has driven all types of institutional investors towards having more diversified investment portfolios, with investment managers offering significant alternatives capabilities being the clear beneficiaries. Notably, allocations to alternative assets now account for 20% of all pension fund assets globally, up from 5% fifteen years ago.”
The research - which for the first time includes a diversified range of institutional investors outside pension funds - shows that pension fund assets represent a third of the Top 100 alternative managers’ assets, followed by insurance companies, sovereign wealth funds, and endowments & foundations.
Craig Baker said: “Pension funds have always been and will remain a very large client group for top alternatives managers, but the demand from non-pension fund investors, such as sovereign wealth funds, is only going to increase in the future.”
The research shows that for the Top 100 managers, North America continues to be the largest destination for alternative capital (48%), with infrastructure as the only exception where more capital is invested in Europe. Overall, one-third of alternative assets are invested in Europe, one-tenth in Asia Pacific with 5% being investing in the rest of the world.
During 2011, pension fund assets increased by around 8% from the year before to $1.0 trillion, and represent around over half of all assets managed by the Top 100 alternatives managers. Real estate managers continue to have the largest share of this with 52%, followed by PEFoFs (23%), Infrastructure (11%), FoHFs (11%) and commodities (3%).
When including pension fund assets managed by individual hedge funds and private equity, the research shows that assets increase to US$1.2 trillion and the split between asset classes for the Top 100 managers changes to real estate managers (40%) followed by PEFoFs (18%), private equity (14%), hedge funds (10%), infrastructure (9%), FoHFs (8%) and commodities (2%).
Craig Baker said: “The trend towards larger allocations to alternatives by pension funds is likely to continue, but the way investors access them is already changing. While pension funds currently have more exposure to funds of funds than any other investor group, this exposure is declining as individual managers - particularly hedge funds and private equity – improve their structures and are seen as a more efficient implementation route than fund of funds vehicles.”
Data from the wider survey shows that at the end of 2011 total assets managed by top 50 PEFoFs, FoHFs and real estate managers were $444bn, $411bn and $1.2 trillion respectively. At the same time, total assets for the top 50 private equity managers and hedge funds were $545bn and $524bn respectively while the top 20 infrastructure and commodities managers manage $221bn and $179bn respectively.
Craig Baker said: “The on-going economic uncertainty is likely to encourage investors away from simply holding equities as their main growth asset and towards a greater use of alternative assets. 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*.”
According to the research, CBRE Global Investors is the largest real estate manager with $94bn and tops the overall rankings, displacing last year’s leader Macquarie Group ($89bn) which is still the largest infrastructure manager.
The Carlyle Group is the largest private equity manager on $91bn with AlpInvest Partners entering the tables for the first time as the top PEFoFs with $41bn. Blackstone Alternative Asset Management is the largest FoHF with $39bn, while Bridgewater Associates is the largest hedge fund with $76bn. BlackRock is the largest commodities manager with $77bn.
*Smart Beta is about identifying good investment ideas that can be structured better, whether by improving existing beta opportunities or creating exposures or themes that are implementable in a low cost, systematic way.
The top 25 ranking
*Figures obtained from publicly available sources and data derived from the Global Billion Dollar Club, published by HedgeFund Intelligence
** Figure obtained from Blackstone’s website
About the survey
Towers Watson conducted this survey for the year to December 2011 to rank the largest alternative investment managers and includes 493 investment manager entries comprising: 89 in real estate, 69 in fund of hedge funds, 59 in private equity fund of funds, 110 hedge funds, 84 private equity, 53 in infrastructure and 29 in commodities. For real estate, commodities and infrastructure, individual managers are included.
The majority of the data (441 entries) comes directly from investment managers with the remainder coming from publicly available sources. Certain individual hedge fund information was sourced from the Global Billion Dollar Club, published by HedgeFund Intelligence. All figures are in US$.
To read The Global Alternatives Survey, please click here.
About Towers Watson Investment
Towers Watson Investment is focused on creating financial value for the world’s leading institutional investors through its expertise in risk assessment, strategic asset allocation and investment manager selection. It is a division of Towers Watson’s Risk and Financial Services business, has over 750 associates worldwide and assets under advisory of over US$2 trillion.
About Towers Watson
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 employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world.
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