Assets under management by private equity, hedge fund, private debt, real estate and infrastructure fund managers bulged to $6.9 trillion in 2014, up from $6.2 trillion a year earlier, according to alternatives data provider Preqin.
Preqin reported Wednesday that hedge funds accounted for more than half of the asset growth across alternatives, despite underwhelming performance, as investors continued to deploy capital in funds that offered attractive opportunities.
Improving valuations mainly drove asset growth across other the other asset classes, Preqin said.
“The recent news of CalPERS cutting hedge funds and reducing the number of private equity partnerships within their portfolio does not reflect the wider sentiment in the industry,” Preqin’s chief executive Mark O’Hare said in a statement.
“Across all asset classes, a much larger proportion of investors plan to increase their exposure rather than cut back their allocations to alternatives,” O’Hare said, citing the firm’s conversations with investors.
Following are key findings from Preqin’s report.
Hedge fund assets under management increased to some $3 trillion in 2014, up from $2.7 trillion at the end of 2013.
This was the biggest growth in assets among alternative investments last year, and came despite lackluster performance.
Hedge funds posted returns of 3.8% in 2014, compared with average returns of 12.3% in 2013. This was their lowest average since 2011.
Preqin predicted that investors would scrutinize the value of investing in hedge funds throughout 2015. Key issues facing the industry over the coming year will be performance and fees.
Total private equity assets under management stood at $3.8 trillion as of June 2014, up from $3.5 trillion as of June 2013. Preqin included in this total private real estate and infrastructure funds.