Alternative investments continue to boom

Renewable energy

Infrastructure investments as an asset class are likely to become more significant in the coming years.

(Photo: dapd)

Frankfurt Professional investors are investing more and more money in investments away from the stock and bond markets. This is shown by surveys and analyzes by the Federal Association of Alternative Investments (BAI) and the auditing and consulting company PwC.

The main reasons are the desire for diversification and the search for a good risk-return ratio and an alternative in view of the record-low interest rates on the part of the central banks. “For the majority of participants, alternative investments are no longer a niche, but an integral part of the portfolio,” says BAI Managing Director Frank Dornseifer.

His statement is based on the latest “BAI Investor Survey”, a survey among 77 institutional investors with assets under management of 1,300 billion euros. On average, 22 percent of the respective portfolios consist of alternative investments such as infrastructure and private equity. By 2025, the proportion is expected to increase to 26 percent, according to Dornseifer.

Around eight years ago, the share of alternative investments was only around 0.5 percent. “This is a brilliant development,” comments the head of the association.

The pension schemes, pension funds, insurance companies and banks and family offices surveyed are most heavily involved in real estate investments, which according to the BAI survey will not change in the future. With regard to the effects of the corona crisis, 79 percent of the managers surveyed had to struggle with losses in performance, almost a third reported valuation problems.

According to Dornseifer, investments in equity capital for companies (private equity) and private credit funds (private debt) will benefit in the period after the corona crisis. In contrast, investors are holding back on hedge funds and commodities or even want to reduce their investments.

A study by the auditing and consulting firm PwC also shows a trend towards private debt: Loans outside of banks are likely to play a key role in financing companies.

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