Alternative investing How are investors adjusting their allocations to alternatives?

The alternatives market has gained wide acceptance in institutional portfolios. However implementation is not always straight forward. Our report provides an overview of how to integrate alternatives.

28 Jan 2021

The last 30 years have seen a steady growth and acceptance of alternative asset classes in institutional portfolios as investors seek diversified sources of income and return.

Meeting return objectives in the current lower-return environment bolsters the appeal of alternatives

The most aggressive users are US university endowments, some with allocations as high as 60%. Yale University started this trend in the 1980s and is now over 75% invested in alternatives. It is the norm to see 40% to 60% allocations to alternatives in large endowments. Global family offices allocated an average 37% to a variety of alternatives according to a recent survey. Mega funds like large public pension plans and sovereign wealth funds typically allocate 15% to 25% to alternatives and are considering increasing their alternatives allocation.

Alternatives allocations by sample investors

Type

Type

Entity

Entity

Size (in billions USD)

Size (in billions USD)

Date

Date

Allocation (%)

Allocation (%)

Equities

Equities

Fixed income & Cash

Fixed income & Cash

Other

Other

Alternatives

Alternatives

Private equity

Private equity

Infrastructure

Infrastructure

Real estate/real assets

Real estate/real assets

Natural resources

Natural resources

Hedge funds

Hedge funds

Commodities

Commodities

Alternatives as % of portfolio

Alternatives as % of portfolio

Type

Public pension plans

Entity

CalPERS

Size (in billions USD)

355.8

Date

Mar-20

Allocation (%)

-

Equities

49

Fixed income & Cash

31

Other

-

Alternatives

-

Private equity

8

Infrastructure

-

Real estate/real assets

13

Natural resources

-

Hedge funds

-

Commodities

-

Alternatives as % of portfolio

21

Type

Sovereign Wealth Fund

Entity

GIC (Singapore)

Size (in billions USD)

>100

Date

Mar-20

Allocation (%)

-

Equities

30

Fixed income & Cash

50

Other

-

Alternatives

-

Private equity

13

Infrastructure

-

Real estate/real assets

7

Natural resources

-

Hedge funds

-

Commodities

-

Alternatives as % of portfolio

20

Type

University endowment

Entity

Yale University

Size (in billions USD)

30

Date

Jun-19

Allocation (%)

-

Equities

17

Fixed income & Cash

7

Other

-

Alternatives

-

Private equity

38

Infrastructure

-

Real estate/real assets

10

Natural resources

6

Hedge funds

23

Commodities

-

Alternatives as % of portfolio

77

Type

Global family office

Entity

121 surveyed

Size (in billions USD)

1.6  (average)

Date

May-20

Allocation (%)

-

Equities

29

Fixed income & Cash

30

Other

6

Alternatives

-

Private equity

16

Infrastructure

-

Real estate/real assets

14

Natural resources

-

Hedge funds

5

Commodities

-

Alternatives as % of portfolio

35

This report provides an overview of the different asset classes investors can integrate into their portfolios more broadly – private equity, hedge funds, real estate, infrastructure, and commodities – and how to do so.

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