BY Richard Summerfield
Global alternative assets are set to increase to $15.3 trillion by 2020, according to a new report from PwC.
This growth in alternative assets will likely be driven by a period of transformation in the global alternative asset management industry as parties active in the space recalibrate their business and operations and make technology a top investment priority.
The report, 'Alternative Asset Management in 2020: Fast Forward to Centre Stage', notes that though the predicted level of growth in the alternative assets space is expected to be achieved over the next five years, that growth is dependent on a number of factors. Primarily, it relies on the continued growth of global monetary policy and the stable development of global GDPs. However, the report notes that growth could drop to $13.6 trillion if interest rates in Europe and the US rise and capital markets undergo corrections.
Much of the expected growth in alternative assets is expected to come away from the traditional developed global markets. Indeed, South America, Africa and the Middle East are expected to be hotbeds over the next five years. "The shift in global economic power from developed to developing regions will drive continued focus on sovereign investors, fast-growing institutions and the emerging middle classes in new markets," said Mike Greenstein, global alternative asset management leader at PwC. "These groups of investors will increasingly seek branded multi-capability alternative investment firms. Currently, a number of alternative firms exist in this category and others will aspire to join them."
Growth in emerging markets is likely to be driven by key trends. The first is a government-incentivised shift to individual retirement plans. Generally speaking, the global population is rapidly ageing. With global pension fund assets expected to reached $56.6 trillion by 2020, alternative assets should play a larger role in allocations. Other growth trends include a marked increase in the number of high-net-worth-individuals from emerging populations and the growth of sovereign investors.