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Willis Towers: PE assets reached $695bn in 2016

Direct private equity and private equity funds of funds accounted for almost a third of the total AUM of the world’s largest alternative asset managers.

More institutional investors turned to alternatives in 2016 in the hunt for better returns, according to a new report from London-based advisory firm Willis Towers Watson. 
 
The assets under management held by the world's largest 100 alternative asset managers rose by 10 percent to $4 trillion in 2016, compared with $3.6 trillion in 2015. Of that amount private equity managers accounted for 17 percent of the share of assets at $695 billion, an increase from the $640 billion recorded in 2015. Meanwhile, private equity funds of funds made up 12 percent of assets at $492 billion.
 
“Private equity has also continued to thrive following the period of strong distributions and investors looking for alpha which is becoming more challenging to achieve with the abundance of capital and limited supply of deals contributing to incredibly rich pricing,” Luba Nikulina, global head of manager research at Towers Watson, said. “Investors are now having to find areas of the market that aren't as expensive or are viewed as contrarian in hopes of achieving successful outcomes.”
 
Blackstone is the largest private equity manager, with more than $100 billion in the asset class, followed by TPG Capital with $72 billion, and KKR with $60 billion, the survey found.

When the assets managed by the top 100 managers were broken down by investor type, pensions funds, funds of funds and sovereign wealth funds were the top three investors in private equity committing $113.3 billion, $42.8 billion and $26.8 billion, respectively.
 
The report also noted growing interest from insurers. “Although the alternative asset manager universe continues to be dominated by pension fund assets, as solutions have continued to evolve that are better aligned to investor needs and incorporate lower cost structures, we have seen growing interest from other investor groups such as insurers looking to lock-in alpha opportunities presented by continued volatility,” Richard Tan, head of private markets for Asia at Willis Towers Watson, said.
 
Property managers claimed the largest alternatives share – 35 percent – or more than $1.4 trillion in assets. Other alternative asset classes covered in the report included hedge funds, funds of hedge funds and commodities. Illiquid credit trailed with 9 percent and $360 billion of assets, while infrastructure made up 4 percent of $161 billion of the AUM held by the 100 managers. 

Illiquid credit was the alternative asset class with the largest percentage increase in 2016, with AUM more than doubling from $178 billion to $360 billion. The firm did not provide the percentage changes for real estate, private equity, private equity fund of funds and infrastructure in the report, and did not respond to inquiries on the matter as of press time.

Additional reporting by Carmela Mendoza