An article by Institutional Investor covers an EY's 2019 Global Alternative Fund Survey on institutional investors moving allocation from Hedge Funds to Private Equity. Snapshots from the article are below:
In 2019, hedge funds made up 33 percent of institutional investors’ allocations to alternatives. That’s a 7 percentage point drop from 2018, according to EY’s 2019 global alternative fund survey released Wednesday. Private equity was the big winner, growing to 25 percent of investors’ alternatives bet from 18 percent the year before, EY reported. Alternatives as a whole made up a quarter of investors’ portfolios, up slightly from 24 percent last year.
We’ve seen that hedge fund offerings have been challenged on a number of fronts. Your long-only and long-short equity managers are continuing to face pressure from ETFs and institutional investors that can do that on their own, Ryan Munson, a partner in EY’s asset and wealth management practice and an author of the report, said in an interview. But with private equity, there isn’t a comparable competing offering. There is a different infrastructure that allocators have to set up if they want to go direct.
According to the report, private equity firms are increasingly competing with hedge funds for assets. More than a quarter of hedge funds reported to EY that they have either a private equity or venture capital fund, while a number of private equity managers said they offer liquid hedge fund strategies.
Another beneficiary is real estate funds:
The EY survey also found that investors have increased their allocation to real estate, from 20 percent of their alternatives investments in 2018 to 23 percent in 2019. Over the next two to three years, the polled institutions said they expect to grow both their private equity and real estate allocations.
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