Industry Updates

Preqin: Investors to increase allocations to alternatives by 2025

Monday, November 16, 2020

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Opalesque Industry Update - Historic outperformance from alternative assets funds and expectations of continued low returns in traditional asset classes, especially fixed income, are the main forces driving investors to allocate more capital to alternative assets. In fact, 81% of investors expect their allocations to alternatives to increase by 2025. However, the composition of their portfolios will evolve. The majority of investors surveyed by Preqin as part of its Future of Alternatives 2025 series expect to deploy a larger proportion of their funds into private equity, private debt and infrastructure by 2025, while more than a third of them will look to invest more with specialized alternatives managers. Further evolution in the alternative asset management industry is expected through a gradual increase in participation by retail investors over the next five years.

Dave Lowery, Head of Research Insights:

"It is a truth long-since acknowledged that investors are progressively making alternative assets a mainstay of their portfolios. But as they become more sophisticated, so do their demands: closer relationships with fund managers; product innovation; and improvements in reporting, transparency, and ESG standards. Fund managers will need to add more customer-centric capabilities, such as more frequent and regular reporting, and develop retail distribution channels. They will also need to pay closer attention to the potential for co-investments and secondaries opportunities, as large institutions like pension funds demand ever more personalized strategies."

Key Investors Facts:

Most investors (81%) polled by Preqin for its Future of Alternatives 2025 in October 2020 said they expect their allocation to alternatives to increase by 2025.
Seventy-nine percent of investors surveyed by Preqin say they expect to commit a larger proportion of their assets to private equity by 2025 compared to today.
Fifty-eight percent of investors expect their allocations to private debt to increase by 2025, while 56% plan to allocate more to infrastructure investments.
More than a third (35%) of investors will look to invest more with specialist managers by 2025, while keeping some allocation with managers that offer a diverse range of strategies.
Regarding retail investors, 35% of surveyed fund managers expect retail investors to account for a larger proportion of their AUM over the next five years.

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