ILLIQUID CREDIT LEADS TO GROWTH IN ALTERNATIVE INVESTMENTS
Posted on in Editorial by Sonja
According to McKinsey & Company’s Alternative Investments Report, the global alternatives market is expected to grow five percent year-on-year, a higher estimate than the one to two percent expected annual pace for the alternatives market. The report expects that by 2020, the alternatives market would make up 15 percent of global assets. Between 2005 and 2013, the global assets under management doubled, from 3.2 trillion USD to 7.2 trillion USD.
High-net-worth and retail investors are leading the new wave of demand due to the availability and access to a wide range of alternative strategies. The most popular strategies are multi-strategy, alternative credit strategies, and absolute return. The United States leads the pack in demand for alternatives, especially amongst family offices, banks, and RIAs. Smaller institutions such as single strategy boutiques have the highest demand for alternatives.
Investors are increasingly looking for alternatives because of the uncertainty and volatility of traditional asset classes. Investors are interested in alternatives to mitigate portfolio volatility while generating steady returns.
According to the report, asset managers are looking for alternatives that provide easy access to a “full set of client investment needs”. Specifically, managers are looking for firms that can easily combine alternative investments with traditional asset classes.
The demand for alternatives will undoubtedly continue to grow in the next few years. Financial institutions of all sizes should capture these opportunities early, as alternative assets are quickly becoming an integral part of investment portfolios - converging alternative with traditional asset management.