Institutional investors across the globe are increasingly looking to alternatives to support investment objectives such as diversification and alpha generation, according to 2012 Global Survey on Alternative Investing released Tuesday by Russell Investments.
The survey, which has been conducted since 1992, provides an important view into the changing nature of institutional perspectives regarding alternative investments.
Institutions participating in the 2012 survey currently have significant allocations to alternative investments – on average, 22% of total fund assets.
Diversification was cited as one of the top three reasons for using alternatives by 90% of respondents, while volatility management and low correlation to traditional investments was mentioned by 64%, and return potential was noted by 45%.
Additionally, the majority of respondents indicated that allocations would remain static or increase over the next one to three years across all alternatives categories.
Thirty-two percent of respondents expect to increase their investment in hedge funds and private real estate, 28% in private infrastructure, 25% in private equity, 20% in commodities, and 12% in public real estate and public infrastructure.
“Since 1992, the Russell Global Survey on Alternative Investing has provided an important view into the changing nature of institutional perspectives regarding alternative investments,” said Julia Cormier, director, alternative investments. “In an environment characterized by low returns, a high level of global economic uncertainty and financial market volatility, alternatives are a critical component of a diversified, multi-asset portfolio. In expectation of continued volatility and market shocks, institutions are trying to shepherd their portfolios by structuring them to prudently manage risk, even as they also seek to achieve returns in a variety of potential market environments.”
Institutions participating in the Survey currently have significant allocations to alternative investments – on average, 22% of total fund assets. Diversification was cited as one of the top three reasons for using alternatives by 90% of respondents, while volatility management and low correlation to traditional investments was mentioned by 64%, and return potential was noted by 45%. Additionally, the majority of respondents indicated that allocations would remain static or increase over the next one to three years across all alternatives categories. Thirty-two perc ent of respondents expect to increase their investment in hedge funds and private real estate, 28% in private infrastructure, 25% in private equity, 20% in commodities, and 12% in public real estate and public infrastructure.
The biennial survey, which was first issued in 1992, targets the largest corporate and public defined benefit plans, corporate defined contribution plans, non-profits and superannuation funds.
Between January and March 2012, 146 institutional investors in North America, Europe, Australia and Japan representing a total of $1.1 trillion in assets completed the online survey.