Alternatives up 25% among world’s largest asset managers

The only standout asset class for growth for the world’s largest 500 asset managers was alternatives, according to Willis Towers Watson research.

The research, collected in conjunction with US investment newspaper Pensions & Investments, revealed while traditional equity and fixed income still make up the majority of all assets – 78.2 percent: 45.4 percent equity, 32.8 percent fixed income – they declined by 7.1 percent during 2015. Yet, alternative assets grew by 25.1 percent.

“The increase in alternative assets shows that in an environment of low returns and increased uncertainty, investors are under pressure to identify other means of achieving more diversity and higher returns,” said, Luba Nikulina, global head of manager research at Willis Towers Watson.

“This shift in strategy is both welcome and essential if the investment industry is to adapt to meet its current and future challenges. However, the world of alternatives is much more complex than traditional bonds and equities, so investors will need to focus on skill, holistic risk management and best in class implementation.”

The research also revealed that the total assets under management (AUM) fell for the first time since 2011, down 1.7 percent to $76.7 trillion at the end of 2015, compared to $78.1 trillion the year before.

North American firms’ AUM totaled $44 trillion at the end of 2015, a decrease of 1.1 percent from the previous year, while assets managed by European managers, including in the UK, decreased by 3.3 percent, to $25.1 trillion. UK-based firms’ assets decreased 2 percent, reducing their AUM to $6.6 trillion.

“The decline in global assets demonstrates the impact of the challenging investment landscape and currency fluctuations on asset managers across the globe,” commented Nikulina.

“The economic slowdown has impacted investment performance. At the same time, asset owners are re-thinking their business models by internalizing asset management capabilities at the larger end of the spectrum and consolidating at the smaller and mid-size end which also has an impact on capital flows to the industry. This trend will continue to put pressure on revenues and require asset managers to further adapt to this challenging and continuously changing environment.”