More than half (53%) of large institutional investors expect allocations to alternatives to rise over the next 12 months, an increase of 14 percentage points compared to 39% two years ago, according to a survey by BNY Mellon.
The study, in which 450 large institutional investors participated, says that the jump in demand for alternatives will drive demand for new technologies and services.
The study forecast that alternative assets under management will surpass the existing level of $7.7 trillion in 2017.
Private equity was found to have the highest share of institutions’ alternative assets allocations (26%). Allocations to real estate, private debt and loans, infrastructure, and hedge funds were 25%, 23%, 19%, and 7%, respectively.
When asked about the two most significant trends in the alternatives space over the next 12 months, 52% of the respondents cited increased indexing while 38% cited increased asset flows from financial advisers and HNWIs.
More than two-third (68%) of the respondents said they will look to offer lower fees in the next 12 months, while 71% plan to offer greater transparency.
BNY Mellon Alternative Investment Services global head of hedge fund services Peter Salvage said: “With new demand, the bar for seamless operational support in alternatives will get even higher. Alternative investment managers need a full and integrated range of services, including custody, cash management, accounting and administration, and investor services so they can focus on their investments rather than the details of fund operations.”