Investors turning to alternatives amid Covid-19 volatility

  • Nearly half of global institutional investors plan to increase allocations to alternatives
  • North American investors have raised allocations to alternatives from 23% last year to 27%
  • Diversification (90%) is the top reason for investing in alternatives

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Institutional Investors Rampimg Up Allocations To Alternatives

(London, August 2020) Demand for alternative investments has increased in the wake of Covid-19 as global institutional investors look to diversify portfolios, new research shows.

A CoreData Research study of more than 450 global institutional investors found nearly half (40%) are set to ramp up allocations to alternatives over the next three to five years.

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Alternatives now account for more than a quarter (26%) of institutional portfolios – up from 24% in 2019. Allocations among North American investors have seen a bigger increase from 23% to 27%.

The survey was carried out between June and July 2020 – indicating that demand for alternatives has increased in response to the market volatility triggered by Covid-19.

Indeed, diversification is front and center of mind for investors when allocating to alternatives. Nine in 10 (90%) global investors cite diversification as the primary reason for investing in the asset class. Other drivers include the prospect of higher long-term returns (44%), risk management (43%) and the illiquidity premium (43%).

“Our findings indicate that institutional investors have looked to weather the Covid-19 storm by seeking shelter in alternatives, which can enhance diversification and risk-adjusted returns,” said Andrew Inwood, founder and principal of CoreData.

Private Debt Is Most Popular Amoung Investors

Within the alternatives space, private debt is proving most popular. Over half (52%) of global investors plan to increase allocations to private debt over the next three to five years, with demand highest among North American (54%) and European (54%) respondents. And half (50%) of global investors expect to raise allocations to private equity, with respondents in Asia (57%) and North America (55%) showing the strongest appetite.

Despite the growing momentum toward alternatives, more than one third (37%) of investors are not looking to increase allocations to the sector. Furthermore, investors point to a number of challenges surrounding the asset class. The primary concern, cited by eight in 10 respondents (80%), is high valuations. This is followed by fees (71%), complexity (61%) and lack of transparency (39%).

“These concerns could put a brake on the adoption of alternatives,” added Inwood. “The ability of asset managers to provide solutions to these challenges is therefore key to increased uptake. While the current crisis has increased the appeal of these non-correlated assets, the alternatives growth story still has a long way to run.”


About Us

CoreData Research is a global specialist financial services research and strategy consultancy. CoreData Research understands the boundaries of research are limitless and with a thirst for new research capabilities and driven by client demand; the group has expanded over the past few years into the Americas, Africa, Asia, and Europe.

CoreData Group has operations in Australia, the United Kingdom, the United States of America, Brazil, Singapore, South Africa and the Philippines. The group’s expansion means CoreData Research has the capabilities and expertise to conduct syndicated and bespoke research projects on six different continents, while still maintaining the high level of technical insight and professionalism our repeat clients demand.

With a primary focus on financial services CoreData Research provides clients with both bespoke and syndicated research services through a variety of data collection strategies and methodologies, along with consulting and research database hosting and outsourcing services.

CoreData Research provides both business-to-business and business to- consumer research, while the group’s offering includes market intelligence, guidance on strategic positioning, methods for developing new business, advice on operational marketing and other consulting services.

The team is a complimentary blend of experienced financial services, research, marketing and media professionals, who together combine their years of industry experience with primary research to bring perspective to existing market conditions and evolving trends.

CoreData Research has developed a number of syndicated benchmark proprietary indexes across a broad range of business areas within the financial services industry.

  • Experts in financial services research
  • Deep understanding of industry issues and business trends
  • In-house proprietary industry benchmark data
  • Industry leading research methodologies
  • Rolling benchmarks

The team understands the demand and service aspects of the financial services market. It is continuously in the market through a mixture of constant researching, polling and mystery shopping and provides in-depth research at low cost and rapid execution. The group builds a picture of a client’s market from hard data which allows them to make efficient decisions which will have the biggest impact for the least spend.