Key Takeaways
- • 53% of global institutional investment executives now expect to increase allocations to alternatives over the next 12 months, representing a 14 percentage point surge from 39% in the prior year's BNY Mellon survey.
- • Alternative assets under management are projected to exceed $7.7 trillion in 2017, signaling substantial capital concentration in private equity, hedge funds, real estate, infrastructure, and private debt instruments.
- • Increased indexing in alternatives and capital flows from high net worth individuals and financial advisors emerge as the two dominant trends, cited by 52% and 38% of surveyed executives respectively, reshaping how alternative assets are structured and serviced.
- • Only 12% of respondents predict declining alternative allocations, indicating broad institutional confidence in the asset class despite a competitive investment environment.
- • BNY Mellon's survey of 450 senior executives from large institutional investment firms reveals structural demand shifts, with respondents anticipating significant changes in how alternative assets are securitized, managed, and distributed to end investors.
Summary
A significant shift toward alternative investments is underway among global institutional investors, according to new research commissioned by BNY Mellon. The bank's survey of 450 senior executives from large institutional investment firms reveals that 53% now expect to increase allocations to alternatives—encompassing private equity, hedge funds, real estate, infrastructure, and private debt—over the next 12 months. This represents a substantial 14 percentage point increase from the prior year's survey, which recorded 39% of respondents holding similar expectations, signaling accelerating institutional appetite for non-traditional asset classes.
The momentum behind alternatives is further underscored by the modest proportion of market skeptics. Only 12% of surveyed executives predict that alternative asset allocations will decline in the coming year, suggesting broad institutional consensus around the durability of the alternatives thesis. BNY Mellon noted that alternative assets under management are expected to surpass $7.7 trillion in 2017, reflecting the substantial scale and growth trajectory of this segment within the global investment landscape.
Two strategic trends are expected to dominate the alternatives space over the next 12 months. Increased indexing of alternative investments was cited by 52% of respondents, reflecting growing investor demand for transparent, systematized exposure to non-traditional assets. Additionally, 38% of executives anticipate significant capital flows originating from financial advisors and high net worth individuals, indicating a broadening of the investor base beyond traditional institutional gatekeepers. These shifts underscore how the alternatives market is undergoing structural transformation in its composition, distribution mechanisms, and service infrastructure.
The survey findings reflect a broader recognition among institutional investors that alternatives now occupy a central—rather than peripheral—role in diversified portfolio construction. The demand for higher-performing asset classes is reshaping not only capital allocation decisions but also how alternative assets are structured, securitized, managed, and serviced. For hedge fund managers, family offices, and alternative investment professionals, this data signals sustained institutional momentum that will likely underpin continued capital concentration in private markets throughout 2018.
The momentum behind alternatives is further underscored by the modest proportion of market skeptics. Only 12% of surveyed executives predict that alternative asset allocations will decline in the coming year, suggesting broad institutional consensus around the durability of the alternatives thesis. BNY Mellon noted that alternative assets under management are expected to surpass $7.7 trillion in 2017, reflecting the substantial scale and growth trajectory of this segment within the global investment landscape.
Two strategic trends are expected to dominate the alternatives space over the next 12 months. Increased indexing of alternative investments was cited by 52% of respondents, reflecting growing investor demand for transparent, systematized exposure to non-traditional assets. Additionally, 38% of executives anticipate significant capital flows originating from financial advisors and high net worth individuals, indicating a broadening of the investor base beyond traditional institutional gatekeepers. These shifts underscore how the alternatives market is undergoing structural transformation in its composition, distribution mechanisms, and service infrastructure.
The survey findings reflect a broader recognition among institutional investors that alternatives now occupy a central—rather than peripheral—role in diversified portfolio construction. The demand for higher-performing asset classes is reshaping not only capital allocation decisions but also how alternative assets are structured, securitized, managed, and serviced. For hedge fund managers, family offices, and alternative investment professionals, this data signals sustained institutional momentum that will likely underpin continued capital concentration in private markets throughout 2018.
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