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Pension funds allocate across the breadth of alternative assets

Alternative assets under management on behalf of pension funds by the world’s largest alternative investment managers remained unchanged in 2009 compared to the year before at USD817bn, according to research by professional services company Towers Watson in conjunction with the Financial Times.

The research also shows that around half of all assets managed by these alternative investment managers are managed on behalf of pension funds.

The Global Alternatives Survey covers five alternatives asset classes: real estate; private equity fund of funds; fund of hedge funds; infrastructure; and commodities.

"Institutional investors continue to diversify into the full range of alternative assets, encouraged by the way these strategies have performed," says Carl Hess, global head of investment at Towers Watson. "The trend away from equity-focused portfolios to more diversified structures is now well established as investors acknowledge the risks associated with an undiversified approach, particularly in light of ongoing economic uncertainty. Indeed, according to our research, allocations to alternative assets have continued to rise and now account for 17 per cent of all pension fund assets globally, up from 6 per cent ten years ago."

An analysis of the top 100 alternatives managers shows that real estate managers dominate, accounting for around 52 per cent of assets (down from 58 per cent in 2008), followed by private equity fund of funds on 21 per cent (20 per cent in 2008), fund of hedge funds on 13 per cent (13 per cent in 2008), infrastructure on 12 per cent (9 per cent in 2008) and commodities on two per cent (0.5 per cent in 2008).

Data from the wider survey shows that at the end of 2009, the top 50 real estate managers, fund of hedge funds and private equity fund of funds managed USD439bn (USD485bn in 2008), USD127bn (USD123bn in 2008) and USD187bn (USD177bn in 2008) respectively.

Infrastructure and commodities remain smaller, but are becoming easier for pension funds to access with assets of the top 15 commodities managers more than tripling in 2009 compared with 2008.

Macquarie Group is the largest infrastructure manager of pension fund assets with USD51.6bn (USD44.4bn in 2008) and also tops the rankings, while HarbourVest Partners once again heads the private equity fund of funds table with USD21.0bn (USD22.4bn in 2008).

Blackstone Alternative Asset Management again manages the largest proportion of fund of hedge funds assets on behalf of pension funds, with a total of USD14.3bn (USD13.5bn in 2008).

ING Real Estate Investment Management tops the real estate table with USD32.4bn (USD40.9bn in 2008) while Pimco retains the leading pension fund commodities manager position with USD8.5bn (USD3.4bn in 2008).

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