During 2007, alternative assets managed on behalf of pension funds by the 99 world’s largest investment managers grew by 40% to US$822 billion compared the previous year.
According to the research produced by Watson Wyatt in conjunction with Global Investor magazine, more than half of the top 99 managers are based in the United States while more than one third are based in Europe.
Real estate managers lead the ranking, occupying the top nine positions and accounting for 62% of the assets. Infrastructure managers were included in the research for the first time this year; all 10 new entrants were ranked in the top 99 and account for 5% of the assets.
“There is no let up in the demand for alternative assets as pension funds around the world seek to diversify their portfolios and capture alpha through absolute return strategies,” says Rogers Unwin, global head of investment consulting at Watson Wyatt. “This is the main reason for such significant growth of assets, with the larger firms being the main beneficiaries of growth. Other features of the year were the increasing concentration and ongoing consolidation in the industry as well as the rise of infrastructure as an asset class.”
The survey includes 190 investment manager entries: 57 in fund of hedge funds, 52 in real estate, 50 in private equity fund of funds, 14 in commodities and 17 in infrastructure.
In the private and hedge fund area, this ranking is focused purely on fund of funds which have traditionally been of most interest to pension funds. For real estate, commodities and infrastructure, direct managers are included.
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Hedge Funds Shift to Cash, Reduce Leverage
Hedge fund managers around the world responded to last year’s difficult market conditions by lowering leverage ratios and moving a significant share of their assets into cash, according to a study.
With industry-wide performance on the decline, the hedge funds participating in this year’s study reported holding a full 15% of their total assets under management in cash at the beginning of 2008.
Cash levels were slightly higher among hedge funds in Asia (17%) and Europe (16%). Equity-oriented funds had 14% of their assets in cash, and fixed income-focused funds had 17%. Among the world’s biggest hedge funds, nearly 12% of assets were invested in cash.
Meanwhile, hedge fund industry leverage ratios declined to about 2.1 at the end of 2007 from 2.3 a year earlier. Overall gross leverage ratios for fixed income-oriented funds declined to an average of approximately 3.0 at the end of 2007 from 3.4 last year.
“In Europe, where hedge fund strategies are more heavily weighted toward fixed income, overall leverage ratios declined to 2.3 from approximately 2.8,” says Greenwich Associates consultant John Feng. “The pullback was more modest in the United States and Asia Pacific.”
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RBC Buys O’Shaughnessy Stake
Royal Bank of Canada has acquired a 10% interest in O’Shaughnessy Asset Management (OSAM) for an undisclosed amount.
“We’re excited about this opportunity to deepen our partnership with OSAM,” says RBC Asset Management’s president, Brenda Vince. “Jim O’Shaughnessy and his team have delivered strong performance for our unitholders over the past 10 years and we look forward to continuing our relationship.”
Stamford, Connecticut-based OSAM is a quantitative money management firm and serves as a sub-advisor to a family of mutual funds through RBC Asset Management.
OSAM also delivers a broad range of equity portfolios to institutional investors and the high net-worth clients of financial advisors.
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Russell Reappoints CIBC Mellon
Russell Investments Canada has reappointed CIBC Mellon to provide global custody, fund accounting, foreign exchange and securities lending services.
“We are honoured to be reappointed by Russell Investments,” says Thomas C. MacMillan, president and chief executive officer of CIBC Mellon. “We look forward to continuing to help Russell meet its long-term strategic objectives by facilitating greater operational efficiency and lower risk through our robust technology platform.”
“Russell Investments’ products and multi-manager approach place great operational complexity on our asset servicing providers,” says Raj Vijh of Russell Investments Canada. “We firmly believe that the strong partnership we have developed with CIBC Mellon brings us an unmatched level of efficiency, accuracy and attention to our needs.”