Alternatives Industry Breaks $6 Trillion AuM Mark

Over the course of 2013, the alternatives industry added over $600 billion in assets to break the $6 trillion AuM mark for the first time, accomplished through a combination of performance and increased allocation, according to Preqin’s 2014 Global Alternatives Reports.
By Jake Safane(2147484770)
Over the course of 2013, the alternatives industry added over $600 billion in assets to break the $6 trillion AuM mark for the first time, accomplished through a combination of performance and increased allocation, according to Preqin’s 2014 Global Alternatives Reports.

Along with the higher assets, investors were also satisfied with the results in 2013, with more than 80% of investors in each alternative asset class—hedge funds, private equity, real estate and infrastructure—saying their investments had either met or exceeded their expectations over the previous 12 months. Plus, over 30% intend to increase their allocations over the next 12 months.

Of the four alternative asset classes, hedge funds saw the highest growth in assets over the last year, growing from $2.30 trillion in 2012 to over $2.66 trillion at the end of 2013. For the year, hedge funds returned 11.08%, which lagged behind the nearly 30% gains of the S&P 500 gains a result of strong investment gains and new asset flows. Still, 84% of investors stated that hedge fund returns had met or exceeded expectations, the highest level recorded by Preqin.

For private equity, total AuM reached $3.5 trillion as of June 2013, up from $3.2 trillion in June 2012. Although 2013 had the most amount of capital raised in the private equity sector since the global financial crisis with $454 billion, only 7% was raised from first-time fund managers, the lowest proportion ever recorded. Still, 71% of investors in private equity intend to commit to their next private equity fund within the next year.

Real estate funds also had their highest fundraising year since the crisis, with assets at $657 billion as of June 2013, up from $576 billion as of June 2012. For public pension funds, this asset class also performed the best over the three years to June 2013, posting average returns of 13.7%, beating the average 13.6% returns on listed equities. Inflows should continue, as 31% of institutional investors in real estate are looking to increase their allocations to the asset class over the next 12 months, while only 5% intend to reduce their exposure.

Lastly, infrastructure funds also reached their record high of $244 billion as of June 2013, up from $210 billion in June 2012. This asset class also has the most amount of institutional investors, 46%, looking to increase their allocations over the next 12 month. Of those looking to invest, 43% expect to allocate $100 million or more.

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