Assets held by private equity, hedge fund, private debt, real estate and infrastructure fund managers rose to nearly US$7 trillion in 2014.
Preqin says total industry assets rose to US$6.91 trillion through 2014, an increase of US$690 billion—up from the $648 billion of asset growth seen in 2013.
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Although the performance of hedge funds over the past year has been generally considered underwhelming, the asset class accounted for more than half of the asset growth across alternatives, as investors continued to deploy capital in funds that offered attractive opportunities. Across the other asset classes, improving valuations have been seen as a primary driver of asset growth.
The recent news of CalPERS cutting hedge funds and reducing the number of private equity partnerships within their portfolio does not reflect the wider sentiment in the industry, says Preqin CEO Mark O’Hare.
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“From our conversations with investors, the majority of investors remain confident in the ability of alternative assets to help achieve portfolio objectives,” he explains.
Across all asset classes, a much larger proportion of investors plan to increase their exposure rather than cut back their allocations to alternatives.
“However, as the investor base for alternative assets grows and becomes more sophisticated, fund managers continue to face the challenge of how to attract this new capital,” O’Hare says. “Those fund managers that continue to innovate with new products and solutions, as well as listening to investor demands for better alignment of interests and lower fees, may well be winners in 2015.”
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