Insurers manage 8% of the world's $3.5trn in alternative assets

Total assets managed by the top 100 alternative investment managers globally reached $3.5trn in 2014 ($3.3trn in 2013), according to research by Towers Watson.

The Global Alternatives Survey, which covers nine asset classes and seven investor types, shows that of the top 100 alternative investment managers, real estate managers have the largest share of assets (33% and over $1trn), followed by hedge funds (23% and $791bn), private equity fund managers (22% and $767bn), private equity funds of funds (PEFoFs) (10% and $342bn), funds of hedge funds (FoHFs) (5% and $214bn), infrastructure (4%) and illiquid credit (3%).

Luba Nikulina, global head of investment manager research at Towers Watson, said: "Investment opportunities other than bonds and equities are now increasingly seen as 'bread and butter' assets, rather than alternative assets. At the same time, lines are blurring between individual 'asset classes' within this group, as investors focus more on underlying return drivers rather than 'asset classes'."

The research - which includes data on a diverse range of institutional investor types - shows that pension fund assets represent a third (33%) of the top 100 alternative managers' assets, followed by wealth managers (19%), insurance companies (8%), sovereign wealth funds (5%), banks (4%), funds of funds (3%) and endowments & foundations (2%).

At the end of 2014, the top 25 managers of insurance company assets managed $288bn (up 5%) -- behind the top 25 alternative asset managers of wealth management assets ($454bn) but ahead of the top 25 managers of sovereign wealth fund assets ($155bn).

Of the total for the top 25 insurers of $288bn, over 60% is allocated to direct real estate funds, with much smaller amounts in illiquid credit and private equity (see table 1).

According to the research, M&G Investments, the asset management arm of the UK's Prudential, is the largest illiquid credit manager with over $33bn, while Pimco, owned by Allianz, is the largest commodities manager with nearly $19bn.

Macquarie Group is the largest infrastructure manager with over $92bn and tops the overall rankings.

Nikulina sounded a note of caution on alternatives: "Investors across the board - from insurers to sovereign wealth funds - should first check they have sufficient governance levels that would enable them to identify genuine and sustainable skill, particularly for very complex alternatives."

The research shows that for the top 100 managers, North America continues to be the largest destination for alternative capital (47%), with infrastructure and illiquid credit as the exceptions where more capital is invested in Europe. Overall, 36% of alternative assets are invested in Europe and 9% in Asia Pacific, with 8% being invested in the rest of the world.

The survey also reveals that the leaders in managing alternative assets for insurance companies include firms owned by insurers such as Axa Investment Managers, M&G and Aviva Investors (see table 2).

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