Craig Baker, Towers Watson

Pension funds increasing alternative asset allocations, says study

Pension fund alternative assets allocations now account for nearly 20 per cent of all pension fund assets across the globe, according to a study by Towers Watson.

 
The 2012 Global Alternative Survey notes the number as a five per cent increase from 15 years ago.
 
The research, which was conducted by Towers Watson, and which included the diverse ranges of figures and asset calculation, showed that pensions fund representing 36 per cent of the top 100 manager assets figured into the “alternative” category.
 
Also noted is the wealth managers holding 19 per cent, insurance companies holding nine per cent, sovereign wealth funds sitting at six per cent, and banks holding at five per cent, with funds of other sub-funds sitting at three per cent. Endowments and foundation funds were in last at two per cent of the overall tallies.
 
Craig Baker, who headed the Towers Watson Investment research, says pensions have always been a large investor group for alternative managers and that the trend will persist for the foreseeable future.
 
"For almost all of the past ten years of this research we have seen increasing allocations to alternative assets by a wide range of investors,” he says. "Not only has the appeal of alternative assets broadened to include insurers and sovereign wealth funds, but the range of alternative assets has also increased beyond the likes of real estate and private equity to include direct hedge funds, infrastructure and commodities. It is therefore not surprising, that allocations to alternative assets by pension funds for example now account for around 19 per cent of all pension fund assets globally, up from five per cent 15 years ago."
 
Such assets increased nearly eight per cent from 2012 numbers and reached USD1.3trn, according to the ranking of top 100 asset managers pension funds. Regarding alternatives, the largest share of pension was held in real estate managers with 39 per cent. This was followed by private equity funds of funds at 20 per cent and private equity at 14 per cent. Hedge funds sat at nine per cent overall, tied with infrastructure, and edging out funds of hedge funds at seven per cent. Commodities were at one per cent overall.

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