2018 Performance Monitor: Investor Insights

by Preqin

  • 25 Sep 2018
  • PE
  • VC
  • HF
  • PD
  • RE
  • INF
  • NR

In our final blog of this series, we share the views on alternative assets expressed by over 500 institutional investors when surveyed in June 2018, as well as their thoughts on how their alternative assets portfolios will perform in the next 12 months.

A decade ago, global alternatives assets under management stood at approximately $3.14tn. Today that figure is $8.86tn, and is conservatively forecast to reach $14tn by 2023. Participation in alternative assets – measured by the proportion of institutional investors and family offices with an active alternatives program – has also mushroomed. This growth in the industry has been driven by the ability of alternative assets to meet the needs of their investors, with private funds delivering returns over the long term that have materially outperformed public markets, and this strong performance looks set to continue in the coming year.

Investors have high expectations of alternative investments in the coming 12 months, with the vast majority of surveyed allocators expecting returns to stay at the same level or increase. As shown in The 2018 Preqin Alternative Assets Performance Monitor, the natural resources and hedge fund industries have experienced periods of underperformance, and therefore investor dissatisfaction, in recent years. It is likely that this relative underperformance is driving investors to expect improved performance from their natural resources and hedge fund holdings in the coming year.

Investors seem most cautious on the outlook for the real estate market, with a fifth of investors expecting worse performance over the next 12 months. While the majority of respondents are expecting their real estate holdings to perform similarly to the past year, potential issues surrounding asset valuations and prime yields are likely of concern to LPs.

While the short-term performance of alternative assets is likely to come under scrutiny from investors, the performance of the market over the longer term will remain a primary concern of many investors.

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