Brad Morrow, New York-based head of manager research in the Americas for Willis Towers Watson PLC, said the increases in private equity, private credit and real asset strategies were due to investors' continued diversification of alternative investment portfolios.
“Diversity, diversity, diversity,” Mr. Morrow said. “Clients are continuing to diversify and implement other return drivers that are not strictly public equity and fixed income.”
Willis Towers Watson consultants have seen an uptick in client interest in infrastructure, private debt and distressed debt as clients seek to diversify the return drivers in their portfolios, Mr. Morrow said.
The sharp drop in energy assets, meanwhile, “is not a surprise,” he said. “A large chunk of the (energy) market repriced” last year.
As for the sharp increase in U.S. buyout assets last year, that was due to a “perfect storm” of distributions to limited partners from exits, fundraising and private equity's returns compared to stock market returns, said Kevin P. Campbell, managing director, private markets, at money manager DuPont Capital Management Corp., Wilmington, Del.
The top three managers of U.S. institutional, tax exempt infrastructure assets retained their top spots. IFM Investors Pty. Ltd. is again in the first position, with assets managed internally for U.S. institutional tax-exempt clients up 111% for the year to $7.2 billion as of Dec. 31. J.P. Morgan Asset Management is second with a 13% gain to $2.7 billion and Brookfield Asset Management, up 16% to $2.6 billion.
In May 2015, IFM Investors closed one of the largest infrastructure transactions of the year, purchasing the bankrupt Indiana Toll Road Concession Co., which operated the Indiana Toll Road, for $5.7 billion, funded with $3.2 billion of equity and $2.5 billion of debt. The deal was Melbourne, Australia-based IFM's second multibillion-dollar U.S. infrastructure deal in 12 months, accounting for the gain.
Brookfield executives attributed the increase to new assets but declined to provide details because the firm is in the midst of fundraising, spokeswoman Suzanne Fleming said.
Brookfield is raising an infrastructure fund with a $10 billion target and a $12 billion hard cap, including a $4 billion commitment from the firm, according to a March 9 memo from the Oregon Investment Council, which runs the $66.5 billion Oregon Public Employees Retirement Fund, Salem. Oregon committed $400 million to the fund.
TIAA Global Asset Management ranked fourth on the list for a second year, even though its assets dipped 2% to $2 billion.
“Infrastructure markets remain competitive. While the demand for assets remains high, we continue to be highly selective in our underwriting process,” said Marietta Moshiashvili, New York-based managing director, energy and infrastructure, at TIAA.
“Our investment approach in infrastructure has remained stable over the past few years,” Ms. Moshiashvili said in an e-mail. “We look for opportunities that provide an essential service to the community or economy.”
For example, last year TIAA purchased a stake in the A30 toll road southwest of Montreal that has a 35-year concession with the Quebec Ministry of Transport.
Among energy managers, TIAA retained its top rank, despite its assets falling 25% to $1.7 billion as of Dec. 31.
Ms. Moshiashvili said the e-mail that TIAA's energy assets were affected “by market volatility and current valuations in the sector.”
“As a long-term investor, we anticipate a recovery of these positions given our prudent leverage strategy and focus on operational excellence,” Ms. Moshiashvili added.
Invesco Ltd. was in the second position among energy managers of U.S. institutional tax-exempt assets, with assets down 29% to $212 million.
In fact, of the four managers reporting energy assets for both year-end 2015 and year-end 2014, all reported double-digit declines.