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Alternative investments on the wane: Watson Wyatt

Pension funds reduced new commitments to alternative investments in 2008 amid a tepid decline globally in alternative assets due to capital calls and some hedge funds freezing redemptions, new research has found.

Watson Wyatt’s Global Alternatives Survey for the year to December 2008, which analyses the top 100 alternatives managers by assets under management, found alternative assets managed on behalf of pension funds by the world’s largest investment managers fell by around 1 per cent to $817 billion last year.

This modest decline contrasted with a 40 per cent increase in the amount of alternatives invested with top managers during 2007, compared to 2006.

The survey covered 143 funds managers and $872 billion in assets across real estate, private equity fund of funds, fund of hedge funds, infrastructure and commodities.

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The rate at which capital was returned to investors also slowed sharply as normal markets disappeared, and some managers imposed freezes on redemptions.

These effects pushed assets in the market up, however further downward revaluation, particularly in the unlisted markets, is expected to lead to a more significant net decline in global assets under management this year.

The research indicates allocations to alternative assets have continued to rise and now account for 17 per cent of all pension fund assets globally, up from 7 per cent 10 years ago.

Globally, ING Real Estate Investment Management is the largest real estate manager of pension fund assets with $40.9 billion, while HarbourVest Partners tops the private equity fund of fund table with $22.4 billion.

Blackstone Alternative Asset Management manages the largest proportion of hedge fund of fund assets with a total of $13.5 billion, while Macquarie tops infrastructure with $44.4 billion and PIMCO is the biggest pension fund
commodities manager with $3.4 billion.

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