Real estate was the most popular alternative asset class in 2008 accounting for 58 percent of assets managed by the 100 largest alternative asset managers, followed by private equity fund of funds with 20 percent. Funds of hedge funds accounted for 13 percent of assets managed by the largest alternatives managers, infrastructure 9 percent and commodities 0.4 percent.
The proportion of infrastructure assets managed by the largest alternatives managers increased from 5 percent to 9 percent, according to research provided by Watson Wyatt, an investment consulting and advisory services provider. In absolute value terms, the top 10 managers in infrastructure managed $72 billion on behalf of pension funds, up from $43 billion in 2007.
Australia's Macquarie Group was the largest investment manager across all alternative asset classes, managing assets worth $44.4 billion on behalf of pension funds. It also topped the infrastructure asset manager rankings, with Australia-based Industry Funds Management and US-based Alinda Capital Partners coming in second and third, respectively.
Infrastructure asset management: view from the top
Alternative assets managed on behalf of pension funds by the world’s 100 largest investment managers declined from $823 billion in 2007 to $817 billion in 2008, a 1 percent decline. This is in contrast to the 40 percent increase in the alternative investments of pension funds from 2006 to 2007.
“I would expect a more significant net decline in global assets under management this year,” Ross Barry, head of portfolio construction group at Watson Wyatt in Australia, said, as many revaluations did not come through until the first half of 2009. However, he added that if longer term trends are looked at, pension funds’ allocations to alternative assets have grown from 7 percent to 17 percent in ten years.
ING Real Estate Investment Management was the largest real estate manager of pension fund assets with $40.9 billion and HarbourVest Partners was the largest private equity fund of funds manager with $22.4 billion. Blackstone Alternative Asset Management managed $13.5 billion fund of hedge fund assets, making it the largest player in that asset class.
In terms of allocation by region, 53 percent of all alternative assets managed on behalf of pension funds are invested in North America, 33 percent in Europe and 11 percent in Asia.
In all, 143 managers participated in the survey, with a total of 206 asset manager entries, as some firms manage assets in more than one asset class. The total included 59 real estate managers, 58 managers of fund of hedge funds, 52 private equity fund of funds managers, 19 infrastructure managers and 18 commodities managers.
In the case of private equity and hedge funds, the data is based solely on fund of funds as pension funds have traditionally been most interested in them and not in direct commitments. Direct investment managers were included for real estate, commodities and infrastructure.