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Investors diversify alternative assets exposure

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Institutional investors are looking for exposure to an ever-widening range of alternative asset classes, with half now holding allocations to three or more, according to Preqin’s H1 2017 Investor Outlook: Alternative Assets.

Preqin reports that 9 per cent of institutions invest in all six alternative asset classes, a fifth have exposure to five or more, and over a third (34 per cent) invest in four or more.
This represents a notable increase over the past 12 months: a year ago, only a quarter of respondents invested in at least four asset classes, and just 13 per cent had exposure to five or more separate markets.
According to the report, four-fifths of all institutional investors make commitments to at least one alternative asset class, a rise of one percentage point from H1 2016.
Satisfaction with the private equity asset class, meanwhile, is at record levels, with 84 per cent of investors holding a positive perception of private equity, and just 3 per cent viewing it negatively.
Conversely, 43 per cent of investors are dissatisfied with the hedge fund industry and 31 per cent plan to decrease their allocation to the asset class over the longer term.
Some 62 per cent of investors plan to increase their allocation to private debt over the longer term, while 53 per cent of investors intend to do the same with infrastructure.
Although 93 per cent of investors felt that their real estate portfolio’s performance either met or exceeded expectations in 2016, over a third (37 per cent) believe their portfolio will perform worse in the coming year, compared to just 9 per cent that expect it to perform better.
More than a fifth (22 per cent) of investors believe that it is now easier to identify attractive natural resources investment opportunities than a year ago, a far higher proportion than any other asset class.
Andrew Moylan (pictured), head of real estate products, says: “Preqin’s investor surveys demonstrate the considerable appetite for alternative assets within the investor community at present, with many looking to ramp up their participation within these markets. It is notable that although the proportion of investors that are not involved in the alternatives industry has remained relatively consistent, those with exposure are now expanding and diversifying their exposure to different asset classes.
“While the private equity and hedge fund markets are large, well-established industries, sectors such as unlisted infrastructure and private debt have seen robust expansion in the past few years. This has been driven by sustained investor appetite, in part due to these asset classes’ ability to outperform public markets over the long term. With the well-noted exception of hedge funds, there is a high level of satisfaction across the alternative assets industry, and it seems as though investor demand for alternatives will continue to grow and become more sophisticated in the near future.” 

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