The size of the alternative investment industry will grow by USD2.5 trillion in the next three years, according to new research from international asset manager Fidante Partners.
The research is the first study not only to aggregate the diverse asset classes that fall under the ‘alternatives’ umbrella, charting their course over the past two decades, but also to project asset growth over the coming three years.
The research’s base case scenario assumes about half of this growth in private equity investments, with growth in infrastructure assets also accelerating. Hedge funds have remained the most popular alternative investment by AUM and could grow faster than almost all other alternative investments over the next three to five years.
Joachim Klement, Head of Investment Research at Fidante Partners, says: “We calculate the size of the global investment market and alternative investments within it. Since 2000 the share of alternative investments has more than doubled from 2.4 per cent to 6.2 per cent at the end of 2017. Pension funds, endowments and high net worth individuals have been the main adopters of alternative investments. We expect the alternatives market to grow broadly in line with the total investment market over the coming three years, with a total growth in assets of USD2.45 trillion.”
Fidante Partners has estimated future growth of alternatives on the basis of three-year future growth rates for each sector. The sum total of these asset growth forecasts enables Fidante Partners to estimate future growth of the total investable market. The estimated future growth of each asset class is based on its relationship with USD3-month and USD 10-year interest rates at the beginning of each year, as well as real GDP growth for the world and CPI for the world (both based on OECD data) during the year. Predictions for interest rates are from Bloomberg, for GDP and CPI are from the OECD Global Economic Outlook.
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