Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Canadian Pension Risk Strategies
    • 2023 Retirement Income
Breadcrumb
  1. Home
  2. ALTERNATIVES
June 01, 2015 01:00 AM

Asset owners prefer specialists for alternatives portfolios

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Nancy Kaye
    David Fann said investors will bypass familiar names for performance.

    Money managers offering both traditional and alternative investment strategies are continuing their push into alternatives, but Pensions & Investments' search and hire data reveal they are not gaining assets as rapidly as firms that specialize in alternative investments.

    Alternatives such as private equity and hedge funds, once considered niche investments, now are close to mainstream, with resulting larger allocations. And more recently, some private debt and credit investments have been finding their way into investors' fixed-income portfolios.

    Only 6.9% — or 301 of 4,385 alternative investment hires tracked by P&I — were of traditional multiasset class managers between Jan. 1, 2010, and May 15 of this year.

    In dollar terms, traditional managers received $33.6 billion of the total of $365.9 billion in alternative investments mandates during the same period.

    This analysis is based on P&I reports, which reflect only a fraction of asset owners' investment activity. Among the investment strategies included in the alternative investment categories are real estate, real assets, private equity, hedge funds and active currency.

    Blackstone Group raised the most capital during the period, with a combined $19.2 billion from 126 commitments. Apollo Global Management was next, collecting a total of $8.2 billion from 39, followed by TPG Capital LP with $8 billion from 52.

    For traditional managers, Neuberger Berman Group LLC garnered the most alternative assets — more than $3.25 billion from 29 commitments during the period. Second was Pacific Investment Management Co., with $2.55 billion from 18, and J.P. Morgan Asset Management with nearly $2.16 billion from 28.

    And despite institutional investors' move into alternatives, traditional managers that only recently began offering alternative strategies have not been among the top 10 alternative managers in P&I's annual money manager rankings.

    Some traditional firms have remained top managers in alternative investment asset classes, but with slow growth rates. For example, while Morgan Stanley Investment Management has been on P&I's top 10 real estate manager list, it has only gained a bit more than $1 billion in real estate assets since 2004. In comparison, Starwood Capital Group LLC's AUM grew 255% to $12.4 billion in the 10 years ended Dec. 31, pushing it to 10th in AUM among real estate managers.

    PE's dramatic shuffle

    The manager shuffle in private equity has been one of the most dramatic.

    WestAM, the asset management arm of German bank WestLB, was third on the private equity list in 2004 but is no longer in business. (Private equity firm Siguler Guff & Co. LLC acquired WestAM's private equity funds-of-funds business in 2009.) Ares Management LLC, the fourth largest private equity manager on P&I's list of private equity managers, raised its first funds as an independent firm in 2003 and 2004.

    “When alternatives were new, allocations were small, there were few providers and no one had deep track records. So it was safe to go to a brand-name provider that investors had a pre-existing relationship with,” said David Fann, president and CEO of San Diego-based private equity consulting firm TorreyCove Capital Partners LLC.

    “Now, allocations to alternatives are large, there are many providers and track records are quantifiable, so it's all about performance and alpha generation,” rather than choosing traditional managers with familiar names that investors know, Mr. Fann said.

    In this new race to gain assets and stay relevant to institutional investors, some large multiasset class managers have taken a multiboutique approach.

    For example, Prudential Financial — through Prudential Real Estate Investors, the nation's first institutional real estate manager — and Principal Real Estate Investors, subsidiary of Principal Global Investors, have expanded into other alternative investment asset classes either organically or by acquisition. They then let those boutique subsidiaries maintain a degree of autonomy, executives at the parent firms say.

    Prudential's alternative investment AUM was $51.2 billion at year-end 2014, up 388% from Dec. 31, 2004. Principal's alternative assets, totaling $13.7 billion at the end of 2014, were up 111% from year-end 2004.

    The advantage of the multiboutique model is that successful money management “takes a village,” said Barbara A. McKenzie, chief operating officer of Des Moines, Iowa-based Principal Global Investors.

    BlackRock, which has also been creating internal boutiques for its alternative investment businesses, grew even more rapidly between 2004 and 2014 — 483.5%, with $14.3 billion in alternatives. In 2004, BlackRock only offered hedge funds. By 2014, company officials had added real estate, infrastructure and commodities.

    The boutiques “can hook into our product development team, product management and risk group, and can bounce ideas off of operations leaders. We have a lot of in-house resources within our structure to help them get where they need to go,” Ms. McKenzie said.

    “A smaller alternatives team all on its own ... will not necessarily have that available to them,” she added.

    Spinoffs

    Mr. Fann said that at the same time, many alternative investment money management groups once affiliated with large financial institutions have spun out as independent firms, “usually due to compensation and governance reasons.”

    These new boutiques helped accelerate the shift of the alternative investment business to specialty firms from large traditional, full-service money managers.

    For example, private debt and credit manager Crescent Capital Group LP, Los Angeles, doubled its AUM since it spun off from TCW Group four years ago, noted Mark Attanasio, Crescent co-founder and managing partner. Crescent had $17.5 billion under management as of March 31, up from $8.5 billion as of Dec. 31, 2010, the day before the split.

    Crescent executives separated from TCW in part to provide executives with long-term ownership incentives, Mr. Attanasio said.

    TCW's alternatives AUM dropped 51.4% to $4.4 billion in the four years ended Dec. 31, 2014.

    Related Articles
    Big managers ruling the roost
    Scale matters for alternatives managers
    Bridgewater strategy pulls in $10 billion in months
    Scale matters for alternatives managers
    Friedman Fleischer & Lowe Capital Partners IV closes at $2 billion
    Southwest Initiative Foundation casts wide net for investment input
    PwC: Alternative assets could nearly double by 2020
    Starwood brings back former asset management head to lead capital raising
    ANREV reports 11.7% return for Asia-Pacific non-listed real estate funds in 2015
    Recommended for You
    Taconic Capital Advisors CIO retiring at year-end
    SoftBank_Storefront_i.jpg
    SoftBank explores plans to become a lender in private credit
    Photo of Cliffwater's Stephen Nesbitt
    Institutions boost exposure to private credit
    Global Macro as a Much-Needed Diversifier
    Sponsored Content: Global Macro as a Much-Needed Diversifier

    Reader Poll

    May 1, 2023
     
    SEE MORE POLLS >
    Sponsored
    White Papers
    Counting on a Crisis: A Catalyst for Investment Innovation?
    A Strategic Allocator's Guide to Productivity and Profits
    Biodiversity: why investors should care
    Quantifying sustainability – the numbers, the data, and the people
    Valuing Banks: Hidden Losses Versus Assets
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Canadian Pension Risk Strategies
      • 2023 Retirement Income