Assets Of Top 100 Alternative Investment Managers Hit $3 Trillion

NEW YORK, July 8, 2013— Total assets managed by the Top 100 alternative investment managers globally reached $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 (34% and over $1.0 trillion), followed by direct private equity fund managers (23% and $717 billion), direct hedge funds (20% and $612 billion), private equity funds of funds (PEFoFs) (10% and $315 billion), funds of hedge funds (FoHFs) (6% and $176 billion), infrastructure (4% and $128 billion) and commodities (4% and $118 billion).

The research also includes the top-ranked managers by assets under management (AUM) in each area. Data from the broader survey show that total global alternative AUM is now $5.1 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 26%, and direct hedge funds, which increases to 26% of the total.

“For almost all of the past 10 years of this research, we have seen increasing allocations to alternative assets by a wide range of investors,” said Zainul Ali, head of manager research, Americas, at Towers Watson Investment Services. “Not only has the appeal of alternative assets broadened to include insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond real estate and private equity to include direct hedge funds, infrastructure and commodities. Not surprisingly, allocations to alternative assets by pension funds now account for around 19% of all pension fund assets globally, up from 5% about 15 years ago.”

The research — which includes a diverse range of institutional investors — shows that pension fund assets represent over one-third (36%) of the Top 100 alternative investment managers’ assets, followed by wealth managers (19%), insurance companies (9%), sovereign wealth funds (6%), banks (5%), funds of funds (FoFs) (3%), and endowments and foundations (2%).

“Pension funds have always been and will remain a very large investor group for top alternatives managers, but the demand from nonpension fund investors, such as insurers, endowments and foundations, and sovereign wealth funds, will only increase in the future,” said Ali.

The research shows that for the Top 100 managers, North America continues to be the largest destination for alternative capital (46%), with infrastructure as the only exception where more capital is invested in Europe. Overall, 37% of alternative assets are invested in Europe, 10% in Asia Pacific and 7% in the rest of the world.

In a ranking of Top 100 asset managers by pension funds, these assets increased by around 8% from the year before to reach $1.3 trillion. Real estate managers continue to have the largest share of pension fund assets with 39%, followed by PEFoFs (20%), private equity (14%), hedge funds (9%), infrastructure (9%), FoHFs (7%) and commodities (1%). Compared on a like-for-like basis, pension fund assets managed by infrastructure managers, private equity managers and PEFoFs managers increased by 14%, 12% and 7% respectively. During the same period, pension fund assets managed by the top FoHFs and hedge fund managers grew by 13% and 12%, respectively. Pension fund assets managed by real estate managers declined by 3%.

“We continue to see pension funds globally putting their faith in alternative assets to help deliver more reliable risk-adjusted returns at the total-fund level, as evidenced by the growth, significant in some instances, in all but one asset class. Further to the increased acceptance of alternative assets in their portfolios, we expect pension funds to continue making larger allocations and to access these assets differently. In particular, we expect a continuing shift toward 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,” said Ali.

Data from the wider survey show that at the end of 2012, the top 25 managers of wealth management assets managed $426 billion, followed by the top 25 managers of insurance company assets ($244 billion), the top 25 managers of bank assets ($160 billion), the top 25 managers of sovereign wealth assets ($154 billion), the top 25 managers of FoF assets ($118 billion), and the top 25 managers of endowment and foundation assets ($72 billion).

“The ongoing economic uncertainty is likely to encourage investors away from simply holding equities as their main growth asset and toward 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,” said Ali.

According to the research, Macquarie Group is the largest infrastructure manager, with around $95 billion, and tops the overall rankings, while CBRE Global Investors ($80 billion) is still the largest real estate manager. Goldman Sachs & Co. is the largest private equity manager in the ranking, with $68 billion, and AlpInvest Partners is the top PEFoF, with $44 billion. Blackstone Alternative Asset Management is the largest FoHF, with $45 billion, while Bridgewater Associates is the largest hedge fund, with $84 billion. BlackRock is the largest commodities manager, with $74 billion.

The top 25 ranking

* Figure obtained from the Global Billion Dollar Club, published by HedgeFund Intelligence

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