Posts tagged: alternative investments

Private Equity: there may be a “new normal” for a $3.5 trillion industry

Private equity firms have enjoyed startling growth over the past few years, posting a 13.7% compound annual growth rate (CAGR) since the end of 2005. That compares to a 7.5% CAGR for hedge funds and 7.7% for other asset managers. These private equity firms now manage $3.65 trillion in global assets around the world.

The growth curve is now going to flatten, according to a report from Deloitte, which analyzed how the growth story may play out for the private equity industry in the next five years. The researchers think it’s most likely for private equity assets under management (AUM) to hit $4.6 trillion by 2020, representing a 5% compound avearage growth rate. “Private equity growth has been slowing over the past few years, a trend that may persist,” the report said. “If this happens, managing to a new normal in private equity may be next on the agenda.”

 

Deloitte PE report

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Global Alternative Asset Classes: Risk and Return

“The picture below outlines some of the benefits from adding alternatives to a diversified portfolio. The top left show 1 year, 3 year and 5 year annualized returns for several different alternative strategies. The bottom left shows the typical institutional investor allocation to alternatives and the right chart shows the return benefits achieved when alternatives are added to a portfolio of stocks and bonds in varying weights”.

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Alternative Investments: New Instruments for the Market.

What are alternative investments?
They are investment instruments, for which the concept of risk and returns are significantly different from the risk and returns of the equity and bond markets. The main “markers” of alternative investments: relatively low liquidity, complexity in estimating the “fair” price and yield, high cost of due diligence and analysis.

What are the main types of alternative investments?
Main types of alternative investments include real property, private equity (direct private funding), commodities (goods), hedge funds, manages futures, and distressed securities (instruments of troubled securities). Please note, that this is a broad description or alternative investments; for example, one could say that another alternative investment would be an investment into pieces of art.

Some types are well known, while others look more complicated… Read more »

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