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nstitutional investors have a healthy
appetite for alternative assets.The Towers
Watson 2014 Global Alternatives Survey
showed that total global alternatives assets
under management hit US$5.7 trillion – up
US$600 billion in a year.
Globally, pension funds are among the biggest
investors in alternatives, but what’s the case
here? The survey found that Australian-domiciled
managers of alternative assets account for 4.4
percent of the survey results, which covered off
a number of asset classes: real estate, private
equity, hedge funds, private equity funds of
funds (PEFoFs), funds of hedge funds (FoHFs),
infrastructure, commodities and illiquid credit.
Among Australian managers, real estate and
infrastructure dominate – and these are also the
asset classes most favoured by super funds.
Generally, superannuation investors prefer
real estate and infrastructure assets because they
tend to apply a more traditional approach to
their portfolio construction. While there is some
interest by funds in illiquid credit strategies, this
is still a relatively new area of alternatives and the
proportion remains small. Often, funds have no
defined ‘bucket’ in which to fit illiquid credit or
other strategies that funds may term as esoteric
While the fees paid to these managers are
higher than for traditional assets, Australian
investors are focused on achieving the best
risk-adjusted returns after all costs, and many
alternative assets also provide a significant level
of diversification to their portfolios. That said,
the focus for Australian investors has increasingly
been towards direct investment products rather
than fund of fund products, as investors have
increased their internal resourcing and are looking
for more cost-effective investment approaches.
Some larger superannuation funds in Australia
expect to increase their allocation to alternatives,
in particular to core domestic infrastructure. A
recent OECD report, Pension Fund Investment in
AUSTRALIAN MANAGERS IN THE GLOBAL
Twenty Australian managers feature in the Survey, with combined funds under management of US$249
billion. The top 10 Australian managers on the list are: Macquarie Group, QIC, AMP Capital Investors,
Industry Funds Management (IFM) Investors, Lend Lease, Charter Hall Group, Whitehelm Capital (formerly
Access Capital), RARE Infrastructure, Colonial First State Global Asset Management and Hastings Funds
Management. Some investment managers may not be included in the Survey, either because the
information is not publicly available or they have elected not to participate.
The research – which includes data on a diverse range of institutional investor types – shows that pension
fund assets represent a third (33 per cent) of the top 100 alternative managers’ assets, followed by wealth
managers (18 per cent), insurance companies (9 per cent), sovereign wealth funds (6 per cent), banks (3 per
cent), funds of funds (3 per cent), and endowments and foundations (3 per cent).
The research shows that for the top 100 managers, North America continues to be the largest
destination for alternative capital (45 per cent), with infrastructure as the only major exception where more
capital is invested in Europe. Overall, 38 per cent of alternative assets are invested in Europe and 7 per cent
in Asia Pacific (with Australia making up 4.4 per cent), and 10 per cent is invested in the rest of the world.
According to the research, Macquarie Group is the largest infrastructure manager with $96 billion and
tops the overall rankings, while Blackstone ($70 billion) is the largest real estate manager. The Goldman
Sachs Group is the largest private equity manager in the ranking on $60 billion with Carlyle Solutions
Group as the top PEFoF manager with $48 billion. Blackstone is the largest FoHF manager with $54 billion,
while Bridgewater Associates is the largest hedge fund manager with $87 billion. BlackRock is the largest
commodities manager with $53 billion, M&G Investments is the largest illiquid credit manager with $31 billion
and the largest manager of real assets is EII Capital Management with $11 billion.
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