Traditional assets accounted for 33% of hiring activity for the year by dollar value, representing $55.2 billion. Of these traditional mandates, 67% ($36.9 billion) came in equities, 25% ($13.9 billion) in fixed-income and 8% ($4.4 billion) in other traditional assets.
Florida State Board of Administration, Tallahassee, was the second most active institutional investor in P&I's database for the 11 months, awarding 41 mandates. (The University of Michigan endowment was first, with 43.)
According to data provided by the FSBA for the 12 months ended Sept. 30, the fund made 37 hires totaling $4.8 billion — the majority of them in alternatives. Spokesman John Kuczwanski explained in an e-mail that this is part and parcel of its strategic investment plan.
“The SBA's focus has been, and will continue to be on filling out our alternative asset classes — mainly strategic investments and to a lesser extent private equity,” he said. As of Sept. 30, the FSBA had 17% of its $138 billion in defined benefit assets allocated to alternatives.
Pennsylvania State Employees' Retirement System, Harrisburg, also made a large number of hires through the year, 28 commitments totaling up to $1.96 billion.
“Our 2012-2013 strategic investment plan drove (our) hires,” explained Pamela Hile, spokeswoman for the $25.7 billion pension fund, in an e-mail. Ms. Hile added “liquidity is a primary concern for the system.”
Ryan Bisch, a principal at Mercer LLC and the leader for the consulting firm's alternatives boutique in North America, Toronto, was not surprised by P&I's data, saying he has seen “continued interest in alternatives for enhancing returns and embedding inflation protection,” particularly in infrastructure.
David Holmes, founding partner of Louisville, Ky.-based manager consultant Eager, Davis & Holmes LLC, said in a telephone interview that his firm also has seen a “significant increase in alternative and real estate investments.”
“The increase in alternatives is due to a desire among institutional investors to reduce risk, diversify and protect against the possibility of inflation,” he added, noting investors are merely “choosing a path based on where the opportunities are.”
“There's a reluctance to increase allocations in traditional fixed income in a low-interest-rate environment,” he said, adding “the volatility of traditional equities makes alternatives and real assets more attractive.”
According to Eager, Davis & Holmes' Tracker Hiring Analytics data, 2,364 mandates were placed in the first three quarters of 2013, representing $158.8 billion of capital. Of this tally, 40.6% of the total mandates were in alternatives, or 38.5% of the capital.