PE increases share of $4t global alternatives pool - survey

Private equity funds accounted for $695 billion, up from $640.2 billion in 2015, while PE fund-of-funds increased from $419.7 billion to $492 billion, according to a survey conducted by Willis Towers Watson. Real estate remains the largest single asset class with $1.43 trillion, up from $1.24 trillion a year earlier, and illiquid credit is the fastest growing, having risen from $178 billion to $359.9 billion.

The direct hedge fund total fell to $674.6 billion from $754.6 billion, which Willis Towers Watson attributes to high fees, skewed alignment of interests, and performance headwinds.

Richard Tan, the firm’s head of private markets for Asia, noted that the growth in private equity comes on the back of strong distributions and investors looking for alpha. However, he cautioned that this alpha “is becoming challenging to achieve with the abundance of capital and limited supply of deals contributing to incredibly rich pricing. Investors are having to find areas of the market that aren’t as expensive or are viewed as contrarian in the hopes of achieving successful outcomes.”

Pension funds remain the largest investors in alternatives among the top 100 managers, with $1.33 trillion in committed capital, or one third of the global total. Insurance companies are the next biggest contributors on $500.5 billion followed by sovereign wealth funds on $221.3 billion. Endowments and foundations are in fourth place with $94.9 billion.

There are 16 direct private equity managers and 15 PE fund-of-funds managers in the top 100. The Blackstone Group is the largest of the former with $100.2 billion, followed by TPG Capital and KKR on $72 billion and $58.4 billion, respectively. Of the latter, Goldman Sachs, HarbourVest Partners and Pathway Capital Management make up the top three.

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• Topics
• Buyout
• Growth
• Real estate
• Fund-of-funds
• GPs
• LPs