Alternative Assets Show Promise For Investors Created by Evan Katz

Appetites for Alternative Assets are Growing

❖ As of most recent data calculated by Preqin late August shows, institutional appetite for alternative assets are progressively growing and show zero signs of slowing.

❖ According to an article published by FINalternatives, “Preqin latest Invest Outlook reveals that fully 79% of institutional managers have exposure to at least one alternative asset class,” (Appetite for Alternative Remains Strong Among Institutional Investors).

❖ That being said, there have been an increasing number of recognized benefits among investors that are related to these alternative assets.

❖ Though these benefits vary between institutional managers, the four main positive alternative asset reasoning similarities that Preqin notes are: diversification, reliable income streams, high returns, and inflation hedging characteristics.

❖ The report also shows that there will likely be a significant increase in investment throughout almost all asset classes in the coming year.

❖ Around 36% of infrastructure investors, 38% of private debt investors, and 42% of private equity investors plan to increase their investment in capital over the next year.

❖ For hedge funds in particular, the Preqin report mentions that around 33% of investors are looking to invest in less capital over the next 12 months in comparison to the 19% that will increase their capital investments.

❖ Other interesting findings the report showed were:

❖ “The vast majority of investors have a positive or neutral view of each asset class. For investors in private equity and real estate, this stands at 95% and 94% respectively. Conversely, 20% of investors in hedge funds have a negative perception of the asset class,” (Appetite for Alternative Remains Strong Among Institutional Investors).

❖ It is clear there are major differences between hedge fund investments and real estate investments.

❖ Additional information states that over 60% of investors in real estate, private debt, and infrastructure are said to have target returns of at least 8% per year, compared to the 60% of private equity investors that have seen returns of at least 14%.

❖ In conclusion, there are many reasons a wide variety of investors are attracted to alternative assets.

❖ Preqin CEO Mark O’Hare stated, “‘The high absolute returns generated by private equity, hedge funds’ ability to reduce volatility, the reliable income generated by private debt and the inflation-hedging characteristics of real assets are just some of the attractions for sophisticated investors,’” (Appetite for Alternative Remains Strong Among Institutional Investors).

❖ For more information regarding Preqin’s latest findings, which surveyed over 460 investors in alternative assets from North America, Europe, Asia and elsewhere, please read FINalternative article here.