Over Half Of Global Investors Expect Rise In Alternatives Allocation - Survey

Robbie Lawther Reporter 1 December 2017


The survey was commissioned by BNY Mellon, and was designed to unveil the alternative investments allocation strategies of senior executives from institutional investment firms around the world.

New data from BNY Mellon shows a 14 per cent jump in institutional investment executives who expect allocations to alternatives to increase over the next 12 months. It is up to 53 per cent from 39 per cent reported in the previous iteration of the survey published in 2016.

BNY Mellon commissioned FT Remark to interview senior executives from 450 large institutional investment firms to understand their strategy for allocating funds to alternative investments (defined as private equity, hedge funds, real estate, infrastructure and private debt/loans). 

A minority of survey respondents, 12 per cent, predict alternative asset allocations will fall next year. The bank said that alternative assets under management will surpass the current level of $7.7 trillion in 2017. 

According to the survey's findings, significant change in alternatives is looming as demand for high-performing asset classes reshapes how assets are structured and securitized on the one hand, and how they are managed and serviced on the other. 

Those surveyed predict that the two most significant trends in the alternatives space over the next 12 months are increased indexing – cited by 52 per cent – and increased asset flows from financial advisors and high net worth individuals, cited by 38 per cent.

Other key findings from the study included that the balance between asset classes is expected to remain stable, with private equity having the highest share (26 per cent) of institutions' alternative assets – and the highest levels of outperformance versus expectations – followed by real estate (25 per cent), private debt and loans (23 per cent), infrastructure (19 per cent) and hedge funds (7 per cent). 

"Alternatives have been generating strong returns at a time when traditional investment classes have underperformed," said Chandresh Iyer, chief executive, alternative investment Services, BNY Mellon. "No sector is immune from technology's transformative effects and fund managers need to become disrupters if they are going to thrive. In the hunt for value in alternatives, investors are pushing for greater control and transparency while continuing to press on fees. Fund managers have to get creative to respond.”

Peter Salvage, global head of hedge fund services, alternative investment services, BNY Mellon, commented: "With new demand, the bar for seamless operational support in alternatives will get even higher. Alternative investment managers need a full and integrated range of services, including custody, cash management, accounting and administration, and investor services so they can focus on their investments rather than the details of fund operations."

The respondents of the survey were situated across the world; Americas (38 per cent), Europe, Middle East, and Africa (38 per cent), and Asia-Pacific (24 per cent).

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes