High Alternative Asset Deal Pricing Worries Investors

Institutional investors in alternative assets profess to be generally satisfied with the performance of their portfolios, according to a recent survey by alternatives data provider Preqin.

However, investors reported high pricing across all closed-end private capital asset classes, and see this as a major challenge facing the industry.

Preqin polled 540 institutional investors in June.

It found that 78% of respondents currently invested in alternative assets, and 47% invested in three or more asset classes. Private equity and real estate were the most-targeted asset classes, with 56% of investors involved in each.

In addition, private equity and private debt enjoyed the best perception among investors: 58% were positive toward private equity, and 57% were positive toward private debt.

Hedge funds, in contrast, were least well looked upon. Indeed, 44% of hedge fund investors said they planned to reduce their longer term allocation, double the proportion that planned to increase it.

Similarly, 13% of natural resources investors intended to commit less in the long term, while 17% said they would allocate more.

The largest proportion of investors across all private capital asset classes saw high asset pricing as a key challenge facing the industry in the coming year. In particular, 86% of private equity investors and 72% of real estate investors cited valuations as a key concern in the months ahead.