Report shows the value of alternatives is on target to hit $14 trillion by 2023
The alternative assets industry has reached a new milestone as investors seek out better returns and diversified portfolios.
The industry surpassed U$10 trillion assets under management globally in June 2019, the latest month of figures available according to a new report from industry analysts Preqin.
In the first six months of 2019 alone, alternatives AUM grew $700 billion to $10.31 trillion and the industry is on track to hit $14 trillion by 2023 based on an average growth rate of 8% between 2013 and 2018.
“In our 2019 reports, we observed that financial markets were at a watershed moment, with high asset valuations, economic and political uncertainty, and a challenging period for investment returns ahead,” Mark O’Hare, Chief Executive, Preqin. Fast forward to today and this is just as true, if not more so: global markets have continued their upwards path, and the outlook is certainly challenging. Alternative assets have a good track record of delivering for their investors, but if they are to continue to do so, it will need to adapt and evolve in response to market challenges and opportunities.”
Alternatives fund managers have seen increase capital inflows from investors – around 80% of institutional investors allocated to the space - and have also benefitted from strong long-term performance.
Despite the growth, Preqin says there are challenges ahead for alternatives and fund managers are having to adapt their approach.
Key measures being taken to address the challenges include:
Hedge funds are consolidating as investors pull a net $82bn out from January to November 2019.
- Private equity activity in tech-based sectors is soaring, even as activity in traditional areas like retail declines.
- Private debt funds are embracing covenant-lite loans to navigate a competitive lending space.
- Infrastructure managers are moving up the risk/return curve in order to preserve returns.
- Real estate funds are seeing sea-changes induced by the move towards e-commerce and the rise and fall of co-working.