Alternative assets under management reached a record USD7.7 trillion in 2017, according to a new survey by BNY Mellon, and look set to increase further with over half of respondents expecting allocations to alternatives to increase in the next 12 months, up from 39 per cent in 2016.
Private equity has the highest share of institutions’ alternative asset allocations and highest levels of outperformance (36 per cent of respondents said results were better than expected). But the rising stars are real estate and private debt, whose share of allocation continues to grow.
After a period of disappointing returns, nearly two-thirds of investors say they are more positive about the prospects for the hedge funds than they were a year ago.
Institutional investors are becoming more confident in making their own decisions through co- investments, direct investments and the increasing use of managed accounts.
All but two of the 450 large institutional investors surveyed say that investor demands for transparency and lower fees are leading them to focus on how technology infrastructure can help support operational efficiencies.
From big data to predictive analytics and the use of satellite imagery, technology is set to be the key driving force behind the alternative assets industry in the years to come .
The vast majority of investors meanwhile, see predictive analytics (96 per cent) as driving force behind the alternative assets industry in the years to come, followed in importance by cloud technology (79 per cent) and big data analytics (67 per cent).
“With new demand, the bar for seamless operational support in alternatives will get even higher,” says Peter Salvage (pictured), global head of hedge fund services, Alternative Investment Services, BNY Mellon. “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.”