Pension funds favour alternative assets

Half of all assets managed by the world’s largest alternative investment managers are those of pension funds, new research has found.

The Towers Watson/Financial Times survey found that pension funds have increased their exposure to alternatives by 16 per cent in 2010 to reach $889 billion, up from $762 billion in 2009.

The total global assets under management also increased by 12 per cent for these managers, bringing it to $1,778 billion.

The Global Alternatives Survey covered five alternative asset classes: real estate, private equity fund of funds, fund of hedge funds, infrastructure and commodities. The research includes rankings of the top managers in each area.

An analysis of the top 100 alternatives managers shows that real estate managers dominate, accounting for around 55 per cent of assets, followed by private equity fund of funds (18 per cent of assets), fund of hedge funds (12 per cent), infrastructure (12 per cent) and commodities (3 per cent).

“The trend away from equity-focused portfolios to more diversified structures is now well established as investors acknowledge the risks associated with an undiversified approach,” said Ross Barry, Towers Watson Australia head of portfolio construction and diversity.

“During 2010, pension funds renewed their interest in real estate,” Barry noted. “Infrastructure and commodities managers have also significantly increased their pension fund assets under management during the past year as investors have become more comfortable with these asset classes,” he said.

Barry said commodities managers have almost doubled the amount of pension assets under management in the last year.

“While concerns over infrastructure’s net-of-fees value proposition still continue, these managers grew their pension funds by around a quarter last year,” he said.

This year, 10 Australian alternatives managers were included in the survey: Macquarie Group, AMP Capital Investors, QIC, Industry Funds Management, ISPT Super Property, Charter Hall Group, Dexus Property Group, Lend Lease Group, Hastings Fund Management Limited and CPT Group.

Of the 10 alternatives managers surveyed, Macquarie Group came in as the largest infrastructure manager of pension fund assets. Macquarie also topped the overall rankings for total assets under management.