Pension Funds Remain Biggest Customers of Alternative Asset Managers

Pension funds are the top customers of alternative asset managers, according to a new survey by Towers Watson of the top 100 alternative managers.

In 2014, pension funds held 33 percent of the assets of the top 100 alternative managers.

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The research, which includes data on a diverse range of institutional investor types, shows that pension fund assets represent one-third (33%) of the top 100 alternative managers’ assets, followed by wealth managers (19%), insurance companies (8%), sovereign wealth funds (5%), banks (4%), funds of funds (3%), and endowments and foundations (2%).

“The alternative asset management industry houses some of the most highly skilled investment teams around, which if combined with aligned interests and fair fees, provide a compelling proposition,” says [Brad Morrow, Tower Watson’s head of investment manager research]. “However, investors across the board should first check that they have sufficient governance levels, particularly for complex alternatives. This ensures they make the most of the increasing market volatility and associated alpha opportunities, particularly given the current lack of clear beta opportunities.”

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In the ranking of top 100 asset managers by pension fund assets, these increased again from the year before to reach over US$1.4 trillion. Real estate managers continue to have the largest share of pension fund assets with 36%, followed by PEFoFs (20%), private equity (15%), hedge funds (12%), infrastructure (8%), FoHFs (6%), illiquid credit (4%, versus 2% in 2013) and commodities (1%).

The survey found that the assets of the top 100 alternative managers collectively reached $3.5 trillion in 2014, up $2 billion from a year earlier.

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