Insto investors allocate more to alternatives
New data from Towers Watson has found that its clients have increased their allocation to hedge fund and private market strategies by 70 per cent since 2010, finishing the year at $12 billion.
As institutional investors look to alternative assets as a portfolio diversifier, Towers Watsons' clients are favouring direct funds rather than funds of funds as they "continue to focus on better fee structures and greater transparency", Towers Watson global head of investment research Craig Barker said.
According to the firm, the number of hedge fund mandates awarded to direct funds continued to increase over 2012, especially in the macro, fixed income and reinsurance areas.
Direct funds also received the majority of assets, particularly the real estate, private equity and infrastructure sectors, Towers Watson stated.
So-called ‘smart beta' strategies also attracted significant assets ($5 billion) in 2012, and $20 billion to date. New mandates were mainly allocated in the bonds, commodities and equities areas, the firm stated.
"These smart beta strategies range from relatively simple ideas such as real estate securities and specialist infrastructure strategies to create liquid diversity, to doing existing betas better, such as non-market cap weight equities," Barker said.
According to Towers Watson, institutional demand for global equity and bond mandates remained high over the last five years, but bonds attracted the most assets in 2012, accounting for US$22 billion.
The year 2012 also saw Towers Watson's global manager selection activity exceed 900, reflecting around US$76 billion of assets moved, the data found.
Barker said the figures point to the growing trend of institutional investors moving away from local markets in favour of diversifying globally.
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