Funds Continue To Allocate Capital To Alternative Investments

diversification of investments can divert riskAt the moment, approximately 20 percent of global pension funds are allocating their investment capital into alternative assets, as opposed to the only 5 percent who did so 15 years ago. Another demonstration of their rise in popularity, is the fact that the total global assets managed by the top 100 alternative investment managers, now amounts to $3.1 trillion; with pension fund assets representing the largest share of those assets (36 percent). Moreover, pension funds will likely rely more upon alternative assets in the coming years, but it is expected that they will access these assets differently. After pension funds, wealth managers came in second, making up 19 percent of global alternatives investment. Wealth managers were followed by insurance companies (9 percent), sovereign wealth funds (6 percent), banks (5 percent), funds of funds (3 percent), and endowments and foundations (2 percent).

In terms of geography, the biggest destination for alternative capital continues to be North America, at 46 percent. Infrastructure to rebuild the Euro Zone is the only instance, where more capital had been invested than in North America. Aside from that, 37 percent of alternative assets are invested in Europe, followed by 10 percent in Asia Pacific. Only seven percent is invested in the rest of the world. It is expected that these figures will experience a change, as emerging markets begin to introduce their own appealing offerings for investment.

With the increasing attention being paid to alternative investments, and the profitable opportunities they have to offer, it is only natural to assume that funds will continue to allocate capital to them. As well, it can be expected that managers will continue to advise their clients to seriously consider adding lower-risk and (somewhat) safer investmentĀ alternatives; to their portfolio.

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