By way of name, alternative investments – investments outside of the traditional stock/bond markets – always have been considered ‘contrarian’. In the future, this may not be so.
Last year, the 100 largest alternative asset managers increased their assets under management by 6%, bringing their total AUM to $3.3 trillion. What’s more, analysts predict the growth rate of global alternative assets under management will increase over the next few years.
Morningstar’s Alternative Investment Survey found that many investors are looking to increase their positions in alternatives. Many cited a weak bond market outlook in this decision. Due to aging demographics, pension funds (whose investments represent 33% of the 100 largest alternative asset managers’ AUM) will be looking to maximize returns while reducing volatility. Their answer is also increased exposure to alternative investments.
In a recent article, the Financial Times labeled alternatives as the “sweet spot between volatile equities and overvalued bonds”. It is this “sweet” positioning that might make alternatives more ‘established’ than ‘alternative’.
Hyper link for Morningstar’s Alternative Investment Survey: http://images.mscomm.morningstar.com/Web/MorningstarInc/%7Bafa33c98-8c77-4468-8054-254599c3f70a%7D_AltSurvey_070314.pdf
Hyperlink for sweet spot: http://www.ft.com/intl/cms/s/0/5cb74072-0814-11e4-acd8-00144feab7de.html#axzz37StHMDqy