Alts expected to play larger role for institutional investorsNews added by Benefits Pro on August 27, 2014

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Joined: September 07, 2011

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By Marlene Y. Satter

Institutional investors sure are fond of alternatives. What’s more, they’re so fond of them that many intend to increase the amount they have allocated to them — both in the short- and long-term.

How many will do that depends on the asset class, according to a new survey from alternative investment industry researcher Preqin. Over the next year, 30 percent of institutional investors expected to boost their investments in private equity; 34 percent in hedge funds; 29 percent in real estate; and a hefty 57 percent in infrastructure.

Over the longer term, 36 percent expected an increase in allocation to private equity, while 35 percent expect to add to hedge funds, 41 percent to real estate and 42 percent to infrastructure.

Some of those choices are affected by specific factors that can steer an investor from one sector to another.

For instance, concerns over the broad economic environment and the question of availability of suitable investments affect both real estate and infrastructure.

On the other hand, regulatory concerns, while felt to be a factor for both hedge funds and private equity, don’t seem to exert quite so much of a discouraging influence.

But fees can be a bone of contention in everything except real estate, pitting investors against fund managers.

Interestingly the matter of regulation is seen as a positive by investors for hedge funds, but perhaps a bit less so for private equity. Fund managers are nowhere near as positive about regulation.

Institutional investors, as noted, are already fans of alternative investments.

Among investors with active allocations in specific asset classes, more than 50 percent have 10 percent or more of their assets invested in hedge funds, while 78 percent have less than 5 percent of assets under management in infrastructure, which the survey characterizes as “the newest and smallest alternative asset class.”

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