The 2007-09 financial crisis prompted traditional investors to make alternative assets a prominent part of their investment portfolio. The main reasons for this shift to alternate asset classes was due to low correlation with equities and bonds, diversification, greater alpha, and hedge against inflation.
Alternative assets have been on the growth path; with only USD 3 trillion under management in 2003, the industry has grown by 400% over past 16 years to USD 15 trillion in 2019 and is expected to reach USD 18 trillion by 20241
Revenue from alternatives assets as percentage of revenue from all asset classes (active, passive, alternative, others) has grown from 29% in 2003 (estimated at USD 30 Bn) to 46% in 2019 (estimated at USD 137 Bn). The projection for revenue for 2024 stands at USD 162 Bn1.
Leading alternative asset classes: Performance and opportunities
Alternative assets primarily can be segregated into 4 asset classes namely Private Equity, Hedge Funds, Real Estate and Private Debt. Infrastructure, energy and other exotic investments like art are some of the other alternative assets in play.
Table 1 represents the breakup of alternative asset classes, their performance, and the respective opportunities.