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Graph of the week: institutional investors’ favourite alternative assets revealed

Graph of the week: institutional investors’ favourite alternative assets revealed

The total assets managed by the top 100 alternative investment managers globally has reached $3.6 trillion (€3.26 trillion), up 3% from last, of which pension funds hold the largest chunk, research by Willis Towers Watson revealed.

The Global Alternatives Survey, which includes data on a diverse range of institutional investor types, shows that pension funds are by far the largest investors in alternatives.

Pension funds’ assets represent a third (34%) of the top 100 alternative managers’ assets, followed by wealth managers (19%), insurance companies (10%), sovereign wealth funds (6%), banks (2%), funds of funds (2%) and endowments & foundations (2%).

However, it wasn't pension funds that increased their investments into alternative space the most. The value of the top 100 pension funds’ assets invested in the top 100 alternative managers increased on the year by 5%, whereas the top 25 endowments and foundation stepped up their alternative investments by 8%. Insurance alternative assets rose only by 1% year on year.

Most popular alternative assets

The research, which covers 10 asset classes and seven investor types, shows that of the top 100 alternative investment managers, real estate managers have the largest share of assets (34% and over €1.1 trillion), followed by hedge funds (21% and €683 billion), private equity fund managers (18% and €579 billion), private equity funds of funds (PEFoFs) (12% and €380 billion), funds of hedge funds (FoHFs) (6% and €201 billion), infrastructure (5%) and illiquid credit (5%).

However, the largest alternative investor type – pension funds – had over 40% of all alternative allocations invested in real estate. Below is the graph with the top 100 pension funds' alternative asset allocation (in billion €):

Commenting on the research outcome, global head of manager research at Willis Towers Watson, Luba Nikulina, said: ‘The alternative asset management industry continues to be remarkably reliant on pension fund money and has earned a position of trust by delivering diversified returns via some of most highly skilled investment teams around.

‘However, in the face of increased scrutiny on the overall value proposition from asset managers to asset owners, there is an ever-increasing demand for more alignment and lower cost. Achieving this would have a positive knock-on effect for managers of attracting assets from other investors, such as insurers and sovereign wealth funds, wanting to make the most of market volatility and associated alpha opportunities; particularly given the current lack of clear beta opportunities.’

Where insurers, SWFs and endowments invest

Below you can find a breakdown of how four types of institutional investors: pension funds, insurers, SWFs as well as endowments & foundations allocated their assets in the alternative space. Hover your cursor over any bar of the graph to see detailed numbers (in billion €):

You can find the raw data used to design the two graphs under this link (Google Spreadsheets).

Among other findings, the research shows that Macquarie Group is the largest infrastructure manager with over €86 billion and tops the overall rankings, while Blackstone is the largest private equity manager with over €85 billion and the largest real estate manager with also almost €85 billion. In the ranking Bridgewater Associates is the largest hedge fund manager with almost €80 billion and Blackstone is the largest FoHF manager with almost €62 billion. Goldman Sachs is the largest PEFoF manager with almost €41 billion and M&G Investments is the largest illiquid credit manager with almost €30 billion.

The research also shows that PIMCO is the largest commodities manager, the largest manager of real assets is TIAA whereas LGT Capital Partners is the largest manager of Insurance-linked investments.

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