Key Takeaways
- • PwC projects the alternative investment industry will expand fivefold to reach US$13.6–$15.3 trillion by 2020, up from US$2.5 trillion currently, driven by demand from sovereign wealth funds, public pension funds, and high-net-worth individuals seeking superior returns.
- • The alternative assets sector—encompassing hedge funds, private equity, and real assets—is undergoing structural transformation as it transitions from niche strategy to mainstream institutional allocations.
- • Specialization is emerging as a key competitive trend, with asset managers increasingly segmenting services between institutional-grade offerings for sovereign and pension funds and retail-focused products, including mutual funds targeting mass affluent investors.
- • Wide variance in industry size estimates persists due to limited disclosure requirements among private alternative managers, creating measurement challenges for market sizing and growth forecasting.
Summary
Professional services firm PwC released a report projecting significant expansion in the alternative investment industry over the next five years. The sector, which encompasses hedge funds, private equity, and real assets, is expected to grow fivefold to reach between US$13.6 trillion and US$15.3 trillion by 2020, compared to current assets under management of approximately US$2.5 trillion. This growth trajectory underscores a fundamental shift in how capital is deployed globally.
The expansion is being catalyzed by three primary investor cohorts: sovereign wealth funds, public pension funds, and newly wealthy individual investors seeking steady, strong returns in an increasingly complex economic environment. According to PwC's analysis, alternative asset management will undergo significant transformation as it adjusts to evolving operating conditions and assumes a more central role within institutional investment portfolios.
A critical dynamic emerging within the alternatives sector is increasing specialization among asset managers. PwC anticipates that firms will tailor their services strategically: some will focus exclusively on institutional clients such as sovereign and pension funds, while others will target individual investors including the mass affluent segment. This bifurcation is being facilitated by the development of mutual fund vehicles that democratize access to alternative strategies previously available only to qualified institutional investors.
Market size estimation remains subject to considerable variance due to structural characteristics of the alternatives industry. Most alternative asset managers operate as private entities and face no mandatory disclosure obligations, creating inherent challenges for firms tracking industry metrics and valuations. This opacity underscores why different market observers produce materially different estimates of current and projected industry size, though directional growth consensus appears robust across forecasting models.
The expansion is being catalyzed by three primary investor cohorts: sovereign wealth funds, public pension funds, and newly wealthy individual investors seeking steady, strong returns in an increasingly complex economic environment. According to PwC's analysis, alternative asset management will undergo significant transformation as it adjusts to evolving operating conditions and assumes a more central role within institutional investment portfolios.
A critical dynamic emerging within the alternatives sector is increasing specialization among asset managers. PwC anticipates that firms will tailor their services strategically: some will focus exclusively on institutional clients such as sovereign and pension funds, while others will target individual investors including the mass affluent segment. This bifurcation is being facilitated by the development of mutual fund vehicles that democratize access to alternative strategies previously available only to qualified institutional investors.
Market size estimation remains subject to considerable variance due to structural characteristics of the alternatives industry. Most alternative asset managers operate as private entities and face no mandatory disclosure obligations, creating inherent challenges for firms tracking industry metrics and valuations. This opacity underscores why different market observers produce materially different estimates of current and projected industry size, though directional growth consensus appears robust across forecasting models.
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