Analysing the trillion-dollar alternative assets arena

BY Fraser Tennant

A comprehensive analysis of the alternative assets industry, including an examination of performance, routes to market and consultant recommendations, is to be found within the pages of a new report by data and intelligence provider Preqin.

Aimed exclusively at institutional investors, the ‘2015 Preqin Investor Network Global Alternatives Report’ features a wide range of topics underpinned by the latest alternatives data and expert analysis.

“The very term ‘alternative assets’ is questionable today," states Mark O’Hare, founder and CEO of Preqin. “With AUM of $7 trillion worldwide and projected to reach $12 trillion by 2020, alternatives have become core for investors.”

The report contains in-depth analysis of: (i) the evolution of alternative assets and the importance of alternatives in investors' portfolios; (ii) methods of accessing alternatives, including separate accounts, co-investments, direct investments, secondaries and funds of funds; (iii) investment consultant recommendations for the year ahead; (iv) investor fund searches, including strategic and geographic preferences; (v) performance across alternative assets; (vi) fund terms and alignment of interests; and (vii) investor attitudes toward alternatives and plans for 2015.

The reasons behind the upsurge in alternatives as a core investment are simple and powerful, claims Mr O’Hare. He says: “Private equity-style investments have demonstrably delivered superior returns to investors over the long term; and hedge fund investments occupy an attractive position on the risk-return frontier (even if the headline returns have disappointed recently).

“Add in infrastructure, private debt, real estate and natural resources opportunities – all with their distinct growth dynamics – and you have a fundamental trend of growth”, he believes.

Elsewhere in the report, Preqin analysts highlight a notable shift in the proportion of investors targeting unlisted infrastructure funds in favour of direct investments in assets. As of December 2014, 65 percent now target funds and 56 percent target direct investments.

Additionally, the report reveals that hedge funds fared worst when examining overall investor sentiment: 35 percent felt that their hedge fund investments fell short of expectations throughout 2014. In terms of private equity, Preqin found that 50 percent of investment consultants are now recommending that their clients invest more capital in small to mid-market buyout funds in 2015 compared to last year.

Mr O’Hare concludes: “As investors come to place greater reliance on alternatives to meet their investment objectives, so their need for reliable information grows. Alternatives are now simply too important to delegate solely to external advisors.”

Report: ‘2015 Preqin Investor Network Global Alternatives Report’

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