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Institutional Investors Beef Up In-House Alternatives Teams

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Institutional investors around the world that are active in alternative assets are becoming more proactive in managing them, according to a new survey by Preqin, an alternative investments data provider.

Thirty percent of investors surveyed said they had grown their investment teams to source private equity, hedge fund, real estate and infrastructure opportunities over the past two years, and the same proportion expected to do so over the next two years.

Some 35% of investors in each of the four main alternative asset classes planned to increase their allocations over the long term.

As alternative assets become an ever more important part of their portfolios, investors need substantial teams to identify and monitor alternative asset investments, Preqin noted in a statement.

Preqin based its survey on responses from some 380 institutional investors in alternative assets throughout June, July and August. Nearly half of respondents were based in North America, with the remainder in Europe, Asia and the rest of the world. Investors included public and private pension funds, endowments and foundations, insurance companies, asset managers, family offices, banks and investment banks.

The survey also found the following:

  • Only 4% of investors said they had downsized their alternative assets investment team over the past year, while 66% had made no changes.
  • 41% of private equity investors used an internal investment team to source new investment opportunities, compared with 27% of hedge fund, 25% of real estate and 14% of infrastructure investors.
  • 51% of private equity investors felt positive about the asset class, while at least a third of investors in each of the other alternative asset classes did so.
  • Hedge fund investors were least satisfied with their investments over the past year, with 27% saying their hedge fund investments had fallen short of expectations.
  • A third of real estate investors said their investments had exceeded expectations, compared with 14% of infrastructure, 12% of private equity and 9% of hedge fund investors who felt the same.

“Although hedge funds have not had the best start to 2014 in terms of returns, all four main alternative asset classes are generating solid performance figures over longer investment horizons, and as a result investors are mostly satisfied with their portfolios,” Andrew Moylan, head of real assets products at Preqin, said in the statement.

And despite hedge funds’ weak first-quarter performance, investor enthusiasm for hedge funds is surging. Indeed, Preqin found in a study earlier this year that hedge fund investors weren’t chasing high returns, but looking for uncorrelated, risk-adjusted returns.


Check out Hedge Fund Investors Not Chasing High Returns on ThinkAdvisor.


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