The desire for yield and risk diversity drives investors into a wider array of so-called alternative investment classes than in the past, figures show.

Institutional investors are spreading their net ever wider in the field of alternative investments to chase after returns, frequently holding three or more varieties in this space, according to Preqin, the research house. 

According to Preqin’s H1 2017 Investor Outlook: Alternative Assets, 9 per cnet of institutions invest in all six alternative asset classes, a fifth have exposure to five or more, and over a third (34 per cent) invest in four or more classes. This is a rise over the past 12 months: a year ago, only a quarter of respondents invested in at least four asset classes, and 13 per cent had exposure to five or more separate markets, it said. (Data was drawn from 533 institutional investors in December 2016.)

Four-fifths of all institutional investors make commitments to at least one alternative asset class, a rise of one percentage point from the first half of last year. Satisfaction with the private equity asset class is at record levels, with 84 per cent of investors holding a positive perception of private equity, and just 3 per cent viewing it negatively. Conversely, 43 per cent of investors are dissatisfied with the hedge fund industry and 31 per cent intend to cut allocation to the asset class over the longer term.

The findings come at a time when, as this publication is regularly told, wealth management institutions such as private banks and family offices have been increasing exposure to private capital, such as in credit and equity, as well as property, in order to win higher returns than are seen available in listed stocks, for example. While relatively illiquid, alternatives are seen as superior long-term investments. 

“Preqin’s investor surveys demonstrate the considerable appetite for alternative assets within the investor community at present, with many looking to ramp up their participation within these markets. It is notable that although the proportion of investors that are not involved in the alternatives industry has remained relatively consistent, those with exposure are now expanding and diversifying their exposure to different asset classes,” Andrew Moylan, head of real estate products at Preqin, said.

Elsewhere, Preqin found that 62 per cent of investors plan to increase their allocation to private debt over the longer term, while 53 per cent of investors intend to do the same with infrastructure.