As of most recent data calculated by Preqin late August shows, institutional appetite for alternative assets are progressively growing and show zero signs of slowing. According to an article published by FINalternatives, “Preqin latest Invest Outlook reveals that fully 79% of institutional managers have exposure to at least one alternative asset class,” (Appetite for Alternative Remains Strong Among Institutional Investors). That being said, there have been an increasing number of recognized benefits among investors that are related to these alternative assets.
Though these benefits vary between institutional managers, the four main positive alternative asset reasoning similarities that Preqin notes are: diversification, reliable income streams, high returns, and inflation hedging characteristics. The report also shows that there will likely be a significant increase in investment throughout almost all asset classes in the coming year. Around 36% of infrastructure investors, 38% of private debt investors, and 42% of private equity investors plan to increase their investment in capital over the next year.
For hedge funds in particular, the Preqin report mentions that around 33% of investors are looking to invest in less capital over the next 12 months in comparison to the 19% that will increase their capital investments. Other interesting findings the report showed were:
“The vast majority of investors have a positive or neutral view of each asset class. For investors in private equity and real estate, this stands at 95% and 94% respectively. Conversely, 20% of investors in hedge funds have a negative perception of the asset class,” (Appetite for Alternative Remains Strong Among Institutional Investors).
It is clear there are major differences between hedge fund investments and real estate investments. Additional information states that over 60% of investors in real estate, private debt, and infrastructure are said to have target returns of at least 8% per year, compared to the 60% of private equity investors that have seen returns of at least 14%.
In conclusion, there are many reasons a wide variety of investors are attracted to alternative assets. Preqin CEO Mark O’Hare stated, “‘The high absolute returns generated by private equity, hedge funds’ ability to reduce volatility, the reliable income generated by private debt and the inflation-hedging characteristics of real assets are just some of the attractions for sophisticated investors,’” (Appetite for Alternative Remains Strong Among Institutional Investors).
For more information regarding Preqin’s latest findings, which surveyed over 460 investors in alternative assets from North America, Europe, Asia and elsewhere, please read FINalternatives article here.
