Key Takeaways
- • Towers Watson's Global Alternatives Survey found that roughly half of all assets managed by the world's largest alternative investment managers are managed on behalf of pension funds, according to the July 12, 2010 study.
- • Pension fund assets run by specialist infrastructure managers rose from 9% of total alternatives allocations in 2008 to 12% in 2009, while commodities managers' share rose from 0.5% to 2% over the same period.
- • Alternative assets under management on behalf of pensions were flat at $817 billion in 2009 versus the prior year.
- • Macquarie Group ranked as the largest infrastructure manager of pension fund assets with $51.6 billion, up from $44.4 billion in 2008.
- • A Russell Investments survey of 119 institutions expects allocations to alternatives to rise by more than a third over two to three years, to 19% of total portfolios.
Summary
Global research by Towers Watson, published July 12, 2010, shows that around half of all assets managed by the world's largest alternative investment managers are managed on behalf of pension funds. The survey points to a shift in pension allocations toward infrastructure and commodities. According to the study, pension fund assets run by specialist infrastructure managers rose from 9% of total alternatives allocations in 2008 to 12% in 2009, while commodities managers saw their share rise from 0.5% to 2% over the same period.
Carl Hess, global head of Investment at Towers Watson, said infrastructure and commodities managers had significantly increased pension fund assets under management over the past year as investors grew more comfortable with these asset classes. He cautioned investors to scrutinize the structure of some mandates, particularly the "net of fees" proposition for infrastructure. Total alternative assets under management on behalf of pensions were unchanged in 2009 from the prior year's $817 billion.
The Global Alternatives Survey covered five sectors: real estate, private equity fund of funds (PEFoF), fund of hedge funds (FoHF), infrastructure and commodities. Among the top 100 alternatives managers, real estate accounted for about 52% of assets (down from 58% in 2008), PEFoF 21% (up from 20%), FoHF 13% (unchanged), infrastructure 12% (up from 9%) and commodities 2% (up from 0.5%). Macquarie Group topped the infrastructure ranking, followed by ING Real Estate Investment Management, JP Morgan Asset Management, AEW Capital Management and Morgan Stanley. The survey included 224 manager entries, up from 206 in 2008.
A separate Russell Investments survey of 119 organizations in North America, Europe, Japan and Australia supports these findings. It found that pension funds, endowments, foundations and insurers expect to lift alternatives allocations by more than a third over the next two to three years, to 19% of total portfolios. Real estate, private equity and hedge funds remain the preferred alternative categories, though commodities and infrastructure are also expected to gain meaningfully.
Carl Hess, global head of Investment at Towers Watson, said infrastructure and commodities managers had significantly increased pension fund assets under management over the past year as investors grew more comfortable with these asset classes. He cautioned investors to scrutinize the structure of some mandates, particularly the "net of fees" proposition for infrastructure. Total alternative assets under management on behalf of pensions were unchanged in 2009 from the prior year's $817 billion.
The Global Alternatives Survey covered five sectors: real estate, private equity fund of funds (PEFoF), fund of hedge funds (FoHF), infrastructure and commodities. Among the top 100 alternatives managers, real estate accounted for about 52% of assets (down from 58% in 2008), PEFoF 21% (up from 20%), FoHF 13% (unchanged), infrastructure 12% (up from 9%) and commodities 2% (up from 0.5%). Macquarie Group topped the infrastructure ranking, followed by ING Real Estate Investment Management, JP Morgan Asset Management, AEW Capital Management and Morgan Stanley. The survey included 224 manager entries, up from 206 in 2008.
A separate Russell Investments survey of 119 organizations in North America, Europe, Japan and Australia supports these findings. It found that pension funds, endowments, foundations and insurers expect to lift alternatives allocations by more than a third over the next two to three years, to 19% of total portfolios. Real estate, private equity and hedge funds remain the preferred alternative categories, though commodities and infrastructure are also expected to gain meaningfully.
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