Deutsche Bank has published its biennial Alternative UCITS Survey, with its findings suggesting that the alternative UCITS market is set for further growth.
Over half of the responding alternative UCITS allocators are planning to increase their allocation through September 2019. Deutsche Bank estimates that these investors collectively will invest USD13.7 billion in new capital to alternative UCITS, having already invested USD9.5 billion in the first three quarters of 2018.
The Alternative UCITS survey, which complements the annual Deutsche Bank Alternative Investment Survey, was completed by 154 global hedge fund allocators with 114 of these already allocating to alternative UCITS. These 114 allocators collectively manage and/or advise USD600 billion of hedge fund assets and USD150 billion of alternative UCITS assets, representing 40 per cent of the USD374 billion overall assets of the alternative UCITS industry.
Marlin Naidoo, Global Head of Capital Introduction & Hedge Fund Consulting, says: “We expect to see more alternative UCITS launches in 2019 in response to investor appetite. Furthermore our survey results show that demand for Asia dedicated strategies far outweighs supply, this should be a signal for fund managers focused on the region to consider launching an alternative UCITS version of their offshore hedge fund product(s).”
Murray Wilson, Head of European Equities Distribution, says: “UCITS will continue to be a key growth driver for the fund management industry. Firms looking to grow their alternatives business through capital raising in Europe should ensure they have a UCITS business plan in place and that they are working with the right partners to execute this.”
Although the percentage of UCITS allocators who have minimum AUM requirements has remained almost unchanged when compared to 2016, there is a clear downward shift in the magnitude of these requirements. The percentage of investors who require a minimum AUM of less than USD50m has increased to 24 per cent from 15 per cent in 2016. At the same time, the percentage of investors who require AUM of over USD50 million has fallen from 43 per cent to 35 per cent over the same period.
The proportion of allocators who require a track record of over two years has increased more than threefold to 26 per cent from 8 per cent two years ago.
Asia alternative UCITS strategies have seen a significant increase in popularity over the past two years. 25 per cent of investors are planning to allocate to Asia, up from 15 per cent in our 2016 survey. The percentage of investors reporting that they struggle to source Asia including Japan strategies has doubled in the past 2 years from 19 per cent to 39 per cent.
Another theme from this year’s survey is that 29 per cent of respondents are looking to increase their allocation to Environmental Social and Governance (ESG) strategies within an alternative UCITS format. Furthermore, with 21 per cent expecting to allocate to offshore funds of the same nature, ESG is the most sought after offshore strategy among the survey’s respondents.
The majority of respondents indicated that they were likely to increase their allocation, despite 62 per cent stating that they felt their UCITS allocations had underperformed year to date.
Nearly half of responding investors currently allocate to alternative risk premia UCITS funds. Of these investors 59 per cent expect to increase their allocation in the next twelve months, with almost a third expecting this increase to be over USD100 million.