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.

Market Updates 28 Jan 2021 3 min read

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	Public pension plans	Sovereign Wealth Fund	University endowment	Global family office
Entity	CalPERS	GIC (Singapore)	Yale University	121 surveyed
Size (in billions USD)	355.8	>100	30	1.6 (average)
Date	March 2020	March 2020	June 2019	May 2020
Allocation (%)	-	-	-	-
Equities	49	30	17	29
Fixed income & Cash	31	50	7	30
Other	-	-	-	6
Alternatives	-	-	-	-
Private equity	8	13	38	16
Infrastructure	-	-	-	-
Real estate/real assets	13	7	10	14
Natural resources	-	-	6	-
Hedge funds	-	-	23	5
Commodities	-	-	-	-
Alternatives as % of portfolio	21	20	77	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.

Adjusting to alternatives