Preqin’s 2014 Global Alternatives Reports reveal that the alternatives assets industry hit a high water mark of $6 trillion in assets under management (AUM) following rising investment interest from institutional investors such as PE, hedge funds, real estate and infrastructure funds.
More importantly, investors were apparently very satisfied with the returns generated during the last twelve months and therefore dumped in over $600 billion into alternative assets during 2013. Significantly, about a third of investors are considering increased allocations to alternatives in the coming year.
Hedge fund investors happy, S&P500 notwithstanding
“Hedge funds posted returns of 11.08% over 2013, but despite lagging the S&P 500 Index, 84% of investors stated that returns had met or exceeded expectations, the highest level recorded,” says Preqin.
Institutional investors have sought to generate higher returns from investments in hedge funds after suffering low yields in an economy yet to attain full recovery.
Preqin observes that nearly two-thirds of all hedge fund capital is accounted for by institutions, and that the hedge fund category was the star performer in the alternative asset class, recording the highest growth in AUM from $2.3 Trillion to $2.66 Trillion.
Post-crisis, 2013 was the strongest fundraising year for real estate assets
Assets in the real estate category of alternatives shot up to $657 Billion in June 2013 compared to $576 Billion in June 2012.
This is not surprising, considering public pension funds that invested in real estate garnered a return over three years of 13.7% versus 13.6% received in equities.
Private equity clocked higher AUM despite excellent exit opportunities
Assets under management in the PE industry reached a level of $3.5 Trillion in June 2013 versus $3.2 Trillion in June 2012 – which is creditable considering the overall very positive environment prevailing for exits.
“2013 saw the largest amount of capital raised since the global financial crisis, with private equity funds raising $454bn, but only 7% was raised from first-time fund managers, the lowest proportion ever recorded,” says Preqin.
The outlook for alternative assets
“The alternative assets industry has continued to demonstrate it can offer superior long-term risk-adjusted performance for investors, as well as offering key diversification opportunities or reducing volatility,” said Mark O’Hare – CEO, Preqin. “With the fundraising environment in 2013 indicating the strong demand investors have for these investments, coupled with the positive intentions gleaned from speaking with investors, Preqin anticipates even further growth for the alternative assets industry throughout 2014,” he added.