Alternative investments remain squarely in the growth phase, with
investors across the globe looking beyond absolute returns as they seek
to incorporate liquidity needs, regulatory status and transparency when
weighing their alternatives allocation decisions. Meanwhile, the
definition of what constitutes an alternative investment continues to
vary by region and, to a greater extent, by organization type. These
dynamics create opportunities and challenges for helping investors fully
understand their potential alternatives contributions.
These were among the key findings of a new Deutsche Asset & Wealth
Management (Deutsche AWM) survey of investors. “The Alternative
Perspective – 2014 Global Survey of Investors in Alternatives” surveyed
373 investment executives from a diverse set of organizations in Europe,
Asia-Pacific and the Americas.
“Alternative investments have come into their own, taking a core
position in an increasing number of portfolios. More than half of the
Deutsche AWM clients whom we surveyed plan to increase their portfolio
exposure to these asset classes, with funding most likely to come from
cash and fixed income rather than from a reallocation between the
various sub-sectors within the alternatives space,” said Dario
Schiraldi, Deutsche AWM’s Head of Global Client Group. “Our 2014
Alternative Perspective survey points to a number of ways for
alternative investments to validate and expand their role in asset
allocation and risk management.”
The survey’s key findingsi include:
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Investors look beyond absolute returns. While investors expect
private equity primaries, single strategy hedge funds, private
infrastructure and private real estate to outperform, our survey
reveals that liquid alternatives, multi-strategy hedge funds and
private equity secondaries may command larger flows, as investors
increasingly focus on factors other than absolute returns.
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Liquidity needs send investors down different paths. Liquidity
needs vary by organization type and region. Going forward, investors
with high liquidity needs will increasingly turn to the expanding
universe of liquid alternatives, while those with low liquidity needs
will seek to capitalize on that flexibility in the form of higher
potential rewards or better fee terms.
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Alternatives are in the eye of the beholder. Differences in the
way firms define alternative investments are evident across regions,
organization types and experience levels. As firms increasingly come
to recognize the specific contributions each alternative asset class
can bring to portfolio diversification, each could potentially earn
its own allocation, as opposed to competing with each other for space
within an overall alternatives alocation.
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ESG is rising in importance. Nearly half of the respondents
indicated that Environmental, Social and Governance criteria play some
role in their alternative investment process, with ESG implementation
most evolved in Europe, followed by North America. As ESG takes on a
larger role, firms will develop more structured frameworks for
choosing managers who implement these criteria.
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One size doesn’t fit all when it comes to growth. Asia-Pacific
arguably offers the most growth opportunity. Respondents from
Asia-Pacific overwhelmingly say that they look to alternative asset
classes to decrease correlations and improve diversification, versus
their Americas and Europe counterparts, who use alternatives for a
broad range of reasons ranging from risk reduction to returns
enhancement.
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Fee pressure is likely to intensify. Fee negotiation is
becoming more commonplace, with investors pushing for better terms
based on arguments including being a Day 1 investor and large ticket
sizes. Investors across regions and organization types say that the
most persuasive argument for a reduction in fees is industry standard
pressure.
Methodology
Deutsche AWM fielded the 2014 Global Survey of Investors in Alternatives
between March and April 2014. The global survey received responses from
373 Deutsche AWM clients, including investment executives at banks,
broker/dealers, corporate and public pensions, foundations and
endowments, family offices, funds of funds, independent wealth managers
and high net worth individuals, insurance companies, investment
consultants and sovereign wealth funds, among others. Respondents ranged
from organizations with less than USD 500 million in total assets under
management to firms with greater than USD 20 billion. The largest
percentage (27%) manages assets between USD 1 billion to USD 5 billion.
Fifty seven percent of respondents are from Europe, followed by the
Americas (35%) and Asia-Pacific, excluding Japan (8%).
Deutsche Asset & Wealth Management
With USD 1.27 trillion of assets under management (as of September 30,
2014), Deutsche Asset & Wealth Management* is one of the world's leading
investment organizations. Deutsche Asset & Wealth Management offers
individuals and institutions traditional and alternative investments
across all major asset classes. It also provides tailored wealth
management solutions and private banking services to high-net-worth
individuals and family offices.
*Deutsche Asset & Wealth Management is the brand name of the Asset
Management and Wealth Management division of the Deutsche Bank Group.
The legal entities offering products or services under the Deutsche
Asset & Wealth Management brand are listed in contracts, sales materials
and other product information documents.
General Disclosures
Survey information as of April 2014. This material is provided for
informational purposes only. It is not an offer or solicitation to buy
or sell any securities.
i These findings represent an aggregation of responses from
respondents of the Deutsche AWM 2014 Global Survey of Investors in
Alternatives and do not reflect or represent the views or opinions of
Deutsche Bank AG.
© 2014 Deutsche Asset & Wealth Management. All rights
reserved. I-036821-1.0
Copyright Business Wire 2014