Institutional investors see the best alternative investment opportunities in private equity this year, although views on all alternative asset classes are generally strong for this year, according to Preqin's latest Investor Outlook report.
Forty-five percent of 430 respondents said private equity presents the best opportunities this year, compared to 23% hedge funds, 18% real estate and 14% infrastructure.
The vast majority of investors have positive or neutral perceptions toward each of the asset classes. Respondents' 2013 returns met or exceeded expectations for at least 80% of investors in each asset class. Twenty-one percent of investors said hedge funds exceeded expectations in 2013; 13% to 15% said the same for the other three asset classes. Total alternatives assets under management increased by more than $600 billion last year to more than $6 trillion overall.
Performance was listed as the top issue of concern by 30% of investors for infrastructure and hedge funds, but regulation was the key issue for private equity, said 26% of those surveyed; and the economic environment for real estate, 24%.
Thirty-five percent of investors plan to make new commitments to real estate in 2014, down from 53% the previous year. In contrast, 68% are looking to make their next private equity commitment in the first half of this year. In infrastructure, 69% plan to commit more or the same amount of money to the asset class this year; 43% expect to commit $100 million or more with 11% planning to commit at least $500 million. Ninety-two percent plan to maintain or increase hedge fund allocation levels over this year.
Looking forward, at least 31% of investors expect to increase long-term allocations to each of the four asset classes. The largest percentage, 46%, said they expect to increase their allocation to infrastructure. Infrastructure actually has the largest share of investors planning to decrease their allocations as well at 16%, while only 8% and 5% of investors plan to decrease allocations to private equity and hedge funds, respectively.