The Russell 2012 Global Survey on Alternative Investing says that global institutional investors are investing in alternatives to support key objectives, such as diversification and alpha generation, and that there is greater interest in customized, investor-driven implementation approaches.
In 2010, when Russell last surveyed institutional investors (including corporate and public defined benefit plans, corporate defined contribution plans, non-profits and superannuation funds) attitudes about alternatives were in a “flux”. Institutions were still adjusting to the repercussions of the global financial crisis across their entire portfolios.
Currently the environment is characterized by low returns, a high level of global economic uncertainty and financial market volatility; alternatives are a critical component of a diversified, multi-asset portfolio.
– Diversification was cited as one of the top three reasons for using alternatives by 90% of respondents, while volatility management and low correlation to traditional investments was mentioned by 64%, and return potential was noted by 45%.
– the majority of respondents indicated that allocations would remain static or increase over the next one to three years across all alternatives categories. Thirty-two percent of respondents expect to increase their investment in hedge funds and private real estate, 28% in private infrastructure, 25% in private equity, 20% in commodities, and 12% in public real estate and public infrastructure.
– PE Investments will increase over the next 3 years, according to the majority of those surveyed, 57%
– The survey also found that investors face challenges in assessing the range of alternatives across the expanding spectrum of opportunities, so education is an important component for integrating alternatives into multi-asset portfolios. (Image source: Russell)