The total value of alternative assets under management on behalf of institutional investors has reached nearly $5 trillion worldwide, according to research published by Towers Watson today.
The consultancy's Global alternatives survey 2012 found that, as of the end of 2011, alternative assets under management totalled $4.871trn. Of this, the total assets managed on behalf of clients by the top 100 alternative investment managers totalled $3.136trn.
Analysis of this top 100 shows that real estate managers have the largest share of assets (35%, $1.1trn), followed by private equity managers (22%, $696bn), hedge funds (21%, $643bn) and private equity fund of funds (9%, $288bn).
Less significant shares were held by fund of hedge funds (6%, $187bn), infrastructure (4%, $119bn) and commodities (3%, $101bn).
The breakdown of the market for overall alternative AUM was largely similar, with the exception of real estate's share falling to 26% and fund of hedge funds increasing to 9% of the total.
Craig Baker, global head of research at Towers Watson Investment, said: 'The on-going economic crisis has driven all types of institutional investors towards having more diversified investment portfolios, with investment managers offering significant alternatives capabilities being the main beneficiaries.
'Notably, allocations to alternative assets now account for 20% of all pension fund assets globally, up from 5% 15 years ago.'
Pension funds provided a third of the assets under management by the top 100 asset managers identified in the survey, but Mr Baker said demand from non-pension fund investors - and in particular sovereign wealth funds - was likely to increase in the future.
He also noted that the way pension funds invested in alternative assets was set to change. 'The trend towards larger allocations to alternatives by pension funds is likely to continue, but the way investors access them is already changing,' he said.
'While pension funds currently have more exposure to funds of funds than any other investor group, this exposure is declining as individual managers - particularly hedge funds and private equity - improve their structures and are seen as a more efficient implementation route than fund of funds vehicles.'
Towers Watson's survey also found that North America was the most popular destination for alternative capital, with 48% of all alternative AUM invested there. Infrastructure was the only alternative where more capital was invested in Europe.
One-third of alternative assets in total were invested in Europe, one-tenth in Asia-Pacific and 5% in the rest of the world.
Among the top 100 asset managers, US-based CBRE Global Investors had the largest alternative AUM, with $94bn invested in real estate. It was followed by The Carlyle Group, with $91bn invested in private equity and the Australian-based Macquarie Group - top of the investor league table last year - which has $89bn invested in infrastructure.
