Acquisitions of businesses and portfolios boosted the assets of some alternative money managers in 2018, with infrastructure displaying the most growth.
About half of the alternative investment sectors tracked by Pensions & Investments' annual survey lost assets under management for U.S. institutional tax-exempt clients, with the rest gaining AUM, albeit mostly in the single digits for the year ended Dec. 31.
Eight alternative investment subasset classes managed for U.S. institutional tax-exempt investors lost assets, a poorer showing than the five in 2017, P&I's annual money manager survey showed.
Strategies with the most growth in U.S. institutional tax-exempt assets managed internally were infrastructure, up 15.8%; real estate equity, up 11.2%; mezzanine debt, 8.9%; timber, 7.4%; and private equity, 5.4%. However, the growth in mezzanine debt, which totaled $3.2 billion in 2018, started from a small base.
The three asset types that lost the most AUM were commodities with a 29.7% decline; energy, down 18.2%; and real estate investment trusts, down 9.6%. A 42.4% decline in hedge funds is almost entirely the result of Bridgewater Associates LP not participating in this year's survey.
Once again, while credit continues to be a big topic among investors and managers, assets are falling in most strategies. Only mezzanine debt and collateralized debt obligations — with a 1.5% increase from a low asset base — gained assets during the survey period.
By contrast, the other four debt-related sectors lost AUM. Distressed debt dropped 6.9%; bank loans were down 6.4%; privately placed debt, down 3.7%; and mortgages dipped 0.1%.
Among the real asset sectors, energy and commodities were the only ones to lose AUM in the 12 months ended Dec. 31. Master limited partnership assets were up 2.9%.
A few managers on P&I's real assets lists gained AUM by acquisition.
The two managers with the most growth in real estate equity AUM internally managed for U.S., tax-exempt institutions — LaSalle Investment Management Inc. and Brookfield Asset Management — acquired all or a portion of other managers last year.
In 2018, LaSalle Investment Management acquired Aviva Investors' $7 billion multimanager real estate business and Aviva's stake in real estate fund Encore Plus, which the two firms co-owned. Also last year, LaSalle agreed to buy an 80% stake in Latitude Management Real Estate Investors, a real estate debt manager.