Convergence in the alternative investment arena is likely to increase over the next 18 to 36 months, investment bankers at Freeman & Co. predict in a new report.
The company's analysts think alternatives firms will expand into other alternative asset classes — for example, hedge funds adding private equity funds, private equity adding real estate funds and mezzanine funds starting collateralized debt strategies. They also predict that firms will add capabilities through mergers, joint ventures, product expansions and team lift-outs, and that managers in every alternative asset class will start investing in new kinds of securities — most notably, the push by hedge funds into private equity.
According to the report, about $3 trillion is invested in more traditional alternative asset classes — hedge funds, real estate and private equity. It also said alternative investments account for about 8% of investments in the United States — $1.9 trillion — led by private equity with 3.9% of allocations ($876 billion) and followed by hedge funds with 2.8% of total assets under management ($649 billion).