Investment trends come and go, so it may be tempting to
think of the current rush to alternatives as a passing fad. On
the one hand, money has continued to pour into the
category—which McKinsey defines to include hedge funds,
funds of funds, private equity, real estate, commodities and
infrastructure—over the past three years, with global assets
hitting an all-time high of $7.2 trillion in 2013. And with their
premium fees, alternatives now account for almost 30
percent of total industry revenues, while comprising only 12
percent of industry assets. Yet returns for many alternatives
products have lagged the sharp gains of broader market
indices in recent years, leading skeptics to contend that
investor patience is wearing thin—and that the alternatives
boom is about to run out of steam.
DealMarket DIGEST Issue 116 // 08 November 2013CAR FOR YOU
This weekly digest provides summaries of recent private equity news items:
1) KKR is teaming with Kuwait Petroleum Corp to bid up to EUR 5 billion for RWE's German oil and gas unit DEA.
2) A new study finds that specialist funds and those demonstrating value-add are in high demand, and that large asset managers may replace investment banks in some product lines within a decade.
3) A report shows that US public pension funds have achieved 10% annualized returns from private equity over 10 years, higher than any other asset class. The top performing funds were located in Massachusetts, Los Angeles, and Texas.
4) Global M&A activity in the insurance
A M&A PROCESS PERSPECTIVE IN THE BANKING SECTORIulian Warter
This document discusses mergers and acquisitions (M&As) in the banking sector. It begins by noting that turmoil in the banking sector has led to structural changes and opportunities for M&As. However, many M&A deals in banking fail due to strategic factors not being properly anticipated. The document then examines various factors that influence cross-border M&A deals in banking, such as achieving economies of scale, diversifying risks, and strategic repositioning. Cultural differences and integration challenges can impact M&A performance. The key to success is properly assessing strategic and cultural fit between banks and effective integration. Overall performance of bank M&As is mixed, with failures often resulting from poor integration and cultural clashes.
IFN Takaful M&A Challenges - 13 August 2014Mujtaba Khalid
The document discusses mergers and acquisitions (M&As) in the Takaful (Islamic insurance) industry. It outlines that while M&A activity can help Takaful companies learn from conventional insurers, international Takaful M&As face several challenges, including regulatory uncertainty across jurisdictions, lack of standardized Shariah and risk management controls, and complex deal structures that take longer due to Shariah compliance needs. Capital requirements and alternative uses of capital by conventional insurers have also reduced appetite for cross-border M&A deals in Takaful. However, international insurers may eventually turn to high-growth Takaful markets to achieve higher returns than in saturated markets.
Mercer Capital's Asset Management Industry Newsletter | Q3 2018 | Focus: Alte...Mercer Capital
Mercer Capital’s Asset Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants.
1) The document discusses opportunities and challenges for banks operating in emerging markets, focusing on 10 rapid-growth markets identified as the next wave beyond the BRICs.
2) Banks in these markets face common challenges around serving unbanked customers without developed infrastructure and meeting growing demand for lending with constrained balance sheets.
3) To achieve profitable growth, banks must balance rapid expansion with efficiency gains, through initiatives like low-cost retail products, strong corporate and investment banking capabilities, advisory services, and new wealth management products.
This chapter discusses globalization and multinational enterprises. It defines a multinational enterprise as a company with subsidiaries or affiliates in foreign countries. It also discusses theories of comparative advantage and how countries and firms specialize in areas where they have a relative production advantage. Market imperfections provide opportunities for multinational firms to exploit economies of scale, expertise, and financial strength across borders. Strategic motives for foreign direct investment include seeking new markets, resources, production efficiencies, and political stability.
The RIA Channel: A Roadmap for Driving GrowthBroadridge
The document discusses strategies for ETF and mutual fund providers to target sales to registered investment advisors (RIAs). It finds that RIAs now sell more funds than major wirehouses. However, RIAs are more numerous and diverse than wirehouses, making them harder to reach with traditional strategies. The document recommends segmenting the RIA market by assets under management. It finds that RIAs managing $100 million to $1 billion in assets are the best target, as they have the largest assets and use funds for over 50% of assets. Finally, it suggests providers develop plans to provide RIAs access to funds, analyze RIA preferences, and align sales resources to the RIA channel.
Volume Growth and Valuation Contraction Global Microfinance Equity Valuation ...Dr Lendy Spires
The document discusses the findings of the 2012 Global Microfinance Equity Valuation Survey conducted by CGAP and J.P. Morgan. It finds that while the volume of microfinance private equity deals and investments grew significantly in 2011, valuation multiples continued to decline from their peak in 2010. The survey covered 68 private equity transactions worth $292 million in 2011. Regional trends saw Latin America and the Caribbean accounting for over half of investments, while sub-Saharan Africa saw the strongest growth. Valuations contracted across most regions on continued concerns about asset quality and regulatory uncertainty in India.
DealMarket DIGEST Issue 116 // 08 November 2013CAR FOR YOU
This weekly digest provides summaries of recent private equity news items:
1) KKR is teaming with Kuwait Petroleum Corp to bid up to EUR 5 billion for RWE's German oil and gas unit DEA.
2) A new study finds that specialist funds and those demonstrating value-add are in high demand, and that large asset managers may replace investment banks in some product lines within a decade.
3) A report shows that US public pension funds have achieved 10% annualized returns from private equity over 10 years, higher than any other asset class. The top performing funds were located in Massachusetts, Los Angeles, and Texas.
4) Global M&A activity in the insurance
A M&A PROCESS PERSPECTIVE IN THE BANKING SECTORIulian Warter
This document discusses mergers and acquisitions (M&As) in the banking sector. It begins by noting that turmoil in the banking sector has led to structural changes and opportunities for M&As. However, many M&A deals in banking fail due to strategic factors not being properly anticipated. The document then examines various factors that influence cross-border M&A deals in banking, such as achieving economies of scale, diversifying risks, and strategic repositioning. Cultural differences and integration challenges can impact M&A performance. The key to success is properly assessing strategic and cultural fit between banks and effective integration. Overall performance of bank M&As is mixed, with failures often resulting from poor integration and cultural clashes.
IFN Takaful M&A Challenges - 13 August 2014Mujtaba Khalid
The document discusses mergers and acquisitions (M&As) in the Takaful (Islamic insurance) industry. It outlines that while M&A activity can help Takaful companies learn from conventional insurers, international Takaful M&As face several challenges, including regulatory uncertainty across jurisdictions, lack of standardized Shariah and risk management controls, and complex deal structures that take longer due to Shariah compliance needs. Capital requirements and alternative uses of capital by conventional insurers have also reduced appetite for cross-border M&A deals in Takaful. However, international insurers may eventually turn to high-growth Takaful markets to achieve higher returns than in saturated markets.
Mercer Capital's Asset Management Industry Newsletter | Q3 2018 | Focus: Alte...Mercer Capital
Mercer Capital’s Asset Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants.
1) The document discusses opportunities and challenges for banks operating in emerging markets, focusing on 10 rapid-growth markets identified as the next wave beyond the BRICs.
2) Banks in these markets face common challenges around serving unbanked customers without developed infrastructure and meeting growing demand for lending with constrained balance sheets.
3) To achieve profitable growth, banks must balance rapid expansion with efficiency gains, through initiatives like low-cost retail products, strong corporate and investment banking capabilities, advisory services, and new wealth management products.
This chapter discusses globalization and multinational enterprises. It defines a multinational enterprise as a company with subsidiaries or affiliates in foreign countries. It also discusses theories of comparative advantage and how countries and firms specialize in areas where they have a relative production advantage. Market imperfections provide opportunities for multinational firms to exploit economies of scale, expertise, and financial strength across borders. Strategic motives for foreign direct investment include seeking new markets, resources, production efficiencies, and political stability.
The RIA Channel: A Roadmap for Driving GrowthBroadridge
The document discusses strategies for ETF and mutual fund providers to target sales to registered investment advisors (RIAs). It finds that RIAs now sell more funds than major wirehouses. However, RIAs are more numerous and diverse than wirehouses, making them harder to reach with traditional strategies. The document recommends segmenting the RIA market by assets under management. It finds that RIAs managing $100 million to $1 billion in assets are the best target, as they have the largest assets and use funds for over 50% of assets. Finally, it suggests providers develop plans to provide RIAs access to funds, analyze RIA preferences, and align sales resources to the RIA channel.
Volume Growth and Valuation Contraction Global Microfinance Equity Valuation ...Dr Lendy Spires
The document discusses the findings of the 2012 Global Microfinance Equity Valuation Survey conducted by CGAP and J.P. Morgan. It finds that while the volume of microfinance private equity deals and investments grew significantly in 2011, valuation multiples continued to decline from their peak in 2010. The survey covered 68 private equity transactions worth $292 million in 2011. Regional trends saw Latin America and the Caribbean accounting for over half of investments, while sub-Saharan Africa saw the strongest growth. Valuations contracted across most regions on continued concerns about asset quality and regulatory uncertainty in India.
Development banks play an important role in promoting industrial development in less developed countries by providing long-term financing for capital-intensive industries and infrastructure projects. Private markets often fail to adequately fund such long-term investments due to risk, liquidity, and return expectations. Development banks fill this gap by lending directly for projects and closely monitoring borrowers. They also provide technical support and influence investment decisions. Early examples include the Credit Mobilier in France and universal banks in Germany that helped drive industrialization. Development banking allows countries to accelerate industrialization and economic growth through targeted financing where private markets are insufficient.
Companies recognize the need to evolve their business models to sustain profitable growth amid ongoing disruption. However, most companies have a long way to go in developing key capabilities like sensing demand, tuning supply chains, innovating for customers, and gaining insights to translate into action. The biggest barriers preventing business transformation include a talent shortage, inconsistent governance, inflexible operating models, and an overemphasis on cost cutting and quarterly results rather than a long term view.
The document discusses various risks faced by foreign investors in emerging markets, including political, economic, and policy risks. It provides examples of how policy risks, such as changes to regulations or failure to enforce contracts, can impact returns on investments. Additionally, the document outlines challenges in hedging against policy risks and recommends strategies foreign investors can use to manage risks, including building political influence and relationships, gathering intelligence on local conditions, and using analytical tools to model policy outcomes and identify leverage points. Overall, the document advocates that foreign investors can make emerging market investments more manageable by properly recognizing dynamic risks and implementing tailored risk management strategies.
CAN MERGERS AND ACQUISITIONS IMPROVE BANKING INDUSTRYIulian Warter
This document discusses mergers and acquisitions (M&As) in the banking industry. It outlines several key drivers for M&A activity in banking, including geographic expansion into emerging markets, consolidation in mature markets, and restructuring of business operations. The document also examines factors that influence the success of M&A deals such as achieving synergies between banks and proper integration processes. Finally, it analyzes strategies used in banking M&As like acquiring new business lines or consolidating smaller banks.
Real estate, followed by infrastructure, dominate real asset investing, according to a new global study. Learn why in our new report sponsored by BlackRock. More information: http://bit.ly/AraBlk
This document summarizes research on cross-border acquisitions (CBAs) made by firms from emerging countries between 1991-2008. It finds that:
1) Targets of CBAs by emerging country firms tend to be small, though some deals exceed $1 billion. Emerging country acquirers experience a positive 1.09% stock return on acquisition announcements.
2) Returns are positively correlated with better corporate governance in the target country, supporting the idea that acquirers "bootstrap" themselves to higher governance standards.
3) Theories on returns to acquirers focus on diversification, efficiency gains, and market power, but neoclassical theories also consider changes in shareholder rights from
White Paper: Low cost country sourcing – navigating unchartered opportunitiesGEP
An increasing number of enterprises are developing newer and more innovative procurement strategies to position themselves for supply management success. One such strategy is for businesses to expand their strategic scope beyond familiar shores to capitalize on growing opportunities abroad through Low Cost Country Sourcing (LCCS).
The decision to go public from an emerging market the ghanaian caseAlexander Decker
This document discusses research on the factors that influence a firm's decision to undertake an initial public offering (IPO) on the Ghana Stock Exchange. It first provides background on private sector financing challenges in Ghana and the role of the stock exchange. A literature review covers theoretical factors that could motivate an IPO, such as the need to raise capital, enhance firm value, and signal private information. The document then outlines some costs and benefits of going public. The research aims to identify which factors most influence IPO decisions for Ghanaian firms and how firm performance is impacted post-IPO. The methodology section indicates the study obtains data on both firms that conducted IPOs and non-IPO firms.
Corporate and shareholder sentiment towards MA has rebounded since the dark days of 2008. Low borrowing costs have coaxed many new buyers, including acquisitive Chinese conglomerates, into the market. The prices of prized assets have risen accordingly. It remains a sellers market in technology-driven deals, particularly in the consumer-goods, financial services, and media and telecommunications sectors.
Mercer Capital's Investment Management Industry Newsletter | Q4 2021 | Focus:...Mercer Capital
Mercer Capital’s Investment Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants.
This document discusses ways that hedge fund managers align their interests with investors through various fee structures and incentives. It finds that high water marks and hurdle rates above 3% are commonly used. Managers also provide transparency, have personal investments in funds, and offer tiered fee structures where fees reduce as assets grow. The goal is a collaborative relationship where both managers and investors benefit from knowledge sharing, customized solutions, and long-term investing. There is no one-size-fits-all approach, and different methods should be tailored to individual situations to incentivize mutually beneficial behavior.
The document discusses different models of corporate governance and ownership. It describes how companies may start as privately owned but later go public, separating ownership and management. The dominant goal in Anglo-American markets is shareholder wealth maximization, but other models exist that also consider stakeholders such as employees and communities. Corporate governance structures use internal boards and external regulators and markets to guide companies and ensure accountability.
The document discusses different models of corporate goal maximization - shareholder wealth maximization (SWM) and corporate wealth maximization (CWM). SWM focuses on maximizing returns for shareholders, while CWM considers the interests of all stakeholders. It also covers failures of corporate governance in the US and subsequent regulations like Sarbanes-Oxley to improve transparency and accountability.
This document provides an overview and guidance for implementing ASC 820, which establishes standards for fair value measurements and disclosures in financial statements. It summarizes key aspects of ASC 820 including the definition of fair value, requirements for level 3 fair value measurements and disclosures, and the effective dates. The document is intended to help alternative investment funds comply with ASC 820 which aims to increase consistency, comparability, and transparency around fair value reporting.
The document discusses how procurement functions need to reinvent themselves to remain relevant. It argues that procurement is currently trapped by outdated paradigms from the past that focus too heavily on cost reduction. However, the global economy has shifted towards services and innovation, which require different skills and strategies from procurement. The document provides a new framework for procurement to focus on sourcing solutions, services and innovation from suppliers in order to drive future value and competitive advantage for their companies. It advocates that procurement adopt a new paradigm where the goal is maximizing total value from suppliers rather than just cost savings.
The document contains a teacher's planner and schedule for 2017, including personal information, a calendar of events for the year, and weekly lesson plans for various courses and assignments. It provides the teacher's schedule across different days of the week as well as planned class activities and assignments on a week-by-week basis throughout the school year.
How international investment can be used to support and advance contemporary ...Sinethemba Msomi
International investment has been an important part of Africa's development debate for decades. While some argue for open foreign investment, others support a gradual regulatory process, as was dominant in Africa until the 1980s. The paper examines how international investment can support development in Africa through regulation, as illustrated by case studies of countries like Vietnam that saw strong growth with policies like import tariffs and ownership limits. It argues that at the development stage, countries need regulatory policies to ensure investments contribute to long-term growth and prevent capital flight, rather than just short-term profits. Overall, the goal for African development should be gradual integration tailored to each country's needs.
O espazo Ortigueira-Mera inclúe a parte interior da ría de Ortigueira, desde a punta do Castro da Moura (Cariño) ata punta do Tallo (Ortigueira), o curso do río Mera ata Soutochao e o rego de Soutochao (cos seus afluentes Pradovello e Canteira), e algunhas áreas de bosque das súas beiras.
CONCELLOS: Cariño, Ortigueira, Cerdido, As Pontes de García Rodríguez, As Somozas.
El documento describe el sistema cardiorespiratorio humano, incluyendo el aparato circulatorio y respiratorio. El aparato circulatorio está compuesto por el corazón, arterias, venas, capilares y sangre, y distribuye oxígeno y nutrientes a las células. El aparato respiratorio incluye las fosas nasales, faringe, laringe, tráquea, pulmones y diafragma, y proporciona oxígeno a las células y elimina dióxido de carbono. Ambos sistemas trabajan juntos para transport
Este documento presenta extractos de un libro de León Denis titulado "El Gran Enigma, Dios y el Universo". En él, Denis explora los grandes enigmas del universo y la existencia humana, como la necesidad de creer en una justicia absoluta más allá de este mundo. Argumenta que los recientes descubrimientos en fenómenos psíquicos y la ciencia del espiritismo aportan pruebas de un mundo espiritual que puede resolver estos enigmas. El autor busca orientar moralmente a la sociedad francesa de su época hacia
Defense Intelligence & The Information ChallengeIBMGovernmentCA
The document discusses the challenges that defense and intelligence agencies face in managing large amounts of information from various sources. It summarizes that agencies now need to transform how they manage threat information due to intensifying threats, more complex threats, and an explosion in data volume, variety, and velocity. It also notes that agency leaders recognize the need for transformation and are defining new requirements to achieve comprehensive, insightful, accurate, and trusted information management through the use of governance, analytics, and technology.
Development banks play an important role in promoting industrial development in less developed countries by providing long-term financing for capital-intensive industries and infrastructure projects. Private markets often fail to adequately fund such long-term investments due to risk, liquidity, and return expectations. Development banks fill this gap by lending directly for projects and closely monitoring borrowers. They also provide technical support and influence investment decisions. Early examples include the Credit Mobilier in France and universal banks in Germany that helped drive industrialization. Development banking allows countries to accelerate industrialization and economic growth through targeted financing where private markets are insufficient.
Companies recognize the need to evolve their business models to sustain profitable growth amid ongoing disruption. However, most companies have a long way to go in developing key capabilities like sensing demand, tuning supply chains, innovating for customers, and gaining insights to translate into action. The biggest barriers preventing business transformation include a talent shortage, inconsistent governance, inflexible operating models, and an overemphasis on cost cutting and quarterly results rather than a long term view.
The document discusses various risks faced by foreign investors in emerging markets, including political, economic, and policy risks. It provides examples of how policy risks, such as changes to regulations or failure to enforce contracts, can impact returns on investments. Additionally, the document outlines challenges in hedging against policy risks and recommends strategies foreign investors can use to manage risks, including building political influence and relationships, gathering intelligence on local conditions, and using analytical tools to model policy outcomes and identify leverage points. Overall, the document advocates that foreign investors can make emerging market investments more manageable by properly recognizing dynamic risks and implementing tailored risk management strategies.
CAN MERGERS AND ACQUISITIONS IMPROVE BANKING INDUSTRYIulian Warter
This document discusses mergers and acquisitions (M&As) in the banking industry. It outlines several key drivers for M&A activity in banking, including geographic expansion into emerging markets, consolidation in mature markets, and restructuring of business operations. The document also examines factors that influence the success of M&A deals such as achieving synergies between banks and proper integration processes. Finally, it analyzes strategies used in banking M&As like acquiring new business lines or consolidating smaller banks.
Real estate, followed by infrastructure, dominate real asset investing, according to a new global study. Learn why in our new report sponsored by BlackRock. More information: http://bit.ly/AraBlk
This document summarizes research on cross-border acquisitions (CBAs) made by firms from emerging countries between 1991-2008. It finds that:
1) Targets of CBAs by emerging country firms tend to be small, though some deals exceed $1 billion. Emerging country acquirers experience a positive 1.09% stock return on acquisition announcements.
2) Returns are positively correlated with better corporate governance in the target country, supporting the idea that acquirers "bootstrap" themselves to higher governance standards.
3) Theories on returns to acquirers focus on diversification, efficiency gains, and market power, but neoclassical theories also consider changes in shareholder rights from
White Paper: Low cost country sourcing – navigating unchartered opportunitiesGEP
An increasing number of enterprises are developing newer and more innovative procurement strategies to position themselves for supply management success. One such strategy is for businesses to expand their strategic scope beyond familiar shores to capitalize on growing opportunities abroad through Low Cost Country Sourcing (LCCS).
The decision to go public from an emerging market the ghanaian caseAlexander Decker
This document discusses research on the factors that influence a firm's decision to undertake an initial public offering (IPO) on the Ghana Stock Exchange. It first provides background on private sector financing challenges in Ghana and the role of the stock exchange. A literature review covers theoretical factors that could motivate an IPO, such as the need to raise capital, enhance firm value, and signal private information. The document then outlines some costs and benefits of going public. The research aims to identify which factors most influence IPO decisions for Ghanaian firms and how firm performance is impacted post-IPO. The methodology section indicates the study obtains data on both firms that conducted IPOs and non-IPO firms.
Corporate and shareholder sentiment towards MA has rebounded since the dark days of 2008. Low borrowing costs have coaxed many new buyers, including acquisitive Chinese conglomerates, into the market. The prices of prized assets have risen accordingly. It remains a sellers market in technology-driven deals, particularly in the consumer-goods, financial services, and media and telecommunications sectors.
Mercer Capital's Investment Management Industry Newsletter | Q4 2021 | Focus:...Mercer Capital
Mercer Capital’s Investment Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants.
This document discusses ways that hedge fund managers align their interests with investors through various fee structures and incentives. It finds that high water marks and hurdle rates above 3% are commonly used. Managers also provide transparency, have personal investments in funds, and offer tiered fee structures where fees reduce as assets grow. The goal is a collaborative relationship where both managers and investors benefit from knowledge sharing, customized solutions, and long-term investing. There is no one-size-fits-all approach, and different methods should be tailored to individual situations to incentivize mutually beneficial behavior.
The document discusses different models of corporate governance and ownership. It describes how companies may start as privately owned but later go public, separating ownership and management. The dominant goal in Anglo-American markets is shareholder wealth maximization, but other models exist that also consider stakeholders such as employees and communities. Corporate governance structures use internal boards and external regulators and markets to guide companies and ensure accountability.
The document discusses different models of corporate goal maximization - shareholder wealth maximization (SWM) and corporate wealth maximization (CWM). SWM focuses on maximizing returns for shareholders, while CWM considers the interests of all stakeholders. It also covers failures of corporate governance in the US and subsequent regulations like Sarbanes-Oxley to improve transparency and accountability.
This document provides an overview and guidance for implementing ASC 820, which establishes standards for fair value measurements and disclosures in financial statements. It summarizes key aspects of ASC 820 including the definition of fair value, requirements for level 3 fair value measurements and disclosures, and the effective dates. The document is intended to help alternative investment funds comply with ASC 820 which aims to increase consistency, comparability, and transparency around fair value reporting.
The document discusses how procurement functions need to reinvent themselves to remain relevant. It argues that procurement is currently trapped by outdated paradigms from the past that focus too heavily on cost reduction. However, the global economy has shifted towards services and innovation, which require different skills and strategies from procurement. The document provides a new framework for procurement to focus on sourcing solutions, services and innovation from suppliers in order to drive future value and competitive advantage for their companies. It advocates that procurement adopt a new paradigm where the goal is maximizing total value from suppliers rather than just cost savings.
The document contains a teacher's planner and schedule for 2017, including personal information, a calendar of events for the year, and weekly lesson plans for various courses and assignments. It provides the teacher's schedule across different days of the week as well as planned class activities and assignments on a week-by-week basis throughout the school year.
How international investment can be used to support and advance contemporary ...Sinethemba Msomi
International investment has been an important part of Africa's development debate for decades. While some argue for open foreign investment, others support a gradual regulatory process, as was dominant in Africa until the 1980s. The paper examines how international investment can support development in Africa through regulation, as illustrated by case studies of countries like Vietnam that saw strong growth with policies like import tariffs and ownership limits. It argues that at the development stage, countries need regulatory policies to ensure investments contribute to long-term growth and prevent capital flight, rather than just short-term profits. Overall, the goal for African development should be gradual integration tailored to each country's needs.
O espazo Ortigueira-Mera inclúe a parte interior da ría de Ortigueira, desde a punta do Castro da Moura (Cariño) ata punta do Tallo (Ortigueira), o curso do río Mera ata Soutochao e o rego de Soutochao (cos seus afluentes Pradovello e Canteira), e algunhas áreas de bosque das súas beiras.
CONCELLOS: Cariño, Ortigueira, Cerdido, As Pontes de García Rodríguez, As Somozas.
El documento describe el sistema cardiorespiratorio humano, incluyendo el aparato circulatorio y respiratorio. El aparato circulatorio está compuesto por el corazón, arterias, venas, capilares y sangre, y distribuye oxígeno y nutrientes a las células. El aparato respiratorio incluye las fosas nasales, faringe, laringe, tráquea, pulmones y diafragma, y proporciona oxígeno a las células y elimina dióxido de carbono. Ambos sistemas trabajan juntos para transport
Este documento presenta extractos de un libro de León Denis titulado "El Gran Enigma, Dios y el Universo". En él, Denis explora los grandes enigmas del universo y la existencia humana, como la necesidad de creer en una justicia absoluta más allá de este mundo. Argumenta que los recientes descubrimientos en fenómenos psíquicos y la ciencia del espiritismo aportan pruebas de un mundo espiritual que puede resolver estos enigmas. El autor busca orientar moralmente a la sociedad francesa de su época hacia
Defense Intelligence & The Information ChallengeIBMGovernmentCA
The document discusses the challenges that defense and intelligence agencies face in managing large amounts of information from various sources. It summarizes that agencies now need to transform how they manage threat information due to intensifying threats, more complex threats, and an explosion in data volume, variety, and velocity. It also notes that agency leaders recognize the need for transformation and are defining new requirements to achieve comprehensive, insightful, accurate, and trusted information management through the use of governance, analytics, and technology.
McKinsey - Solar power-darkest before dawnRobert Mertz
This document summarizes a McKinsey report on the solar power industry. It finds that while the industry currently faces challenges from oversupply and reduced subsidies, costs for solar power will continue to decline significantly in the coming years. By 2020, installed solar capacity could reach 400-600 GW globally, a 50-fold increase from 2005. Much of this growth will come from distributed generation serving customers not reliant on subsidies. Key customer segments are residential and commercial users in sunny areas, those with moderate sun and high electricity prices, and off-grid applications. The industry is entering a maturation phase that could enable stable expansion after 2015 if companies focus on cost reductions.
How the balanced scorecard complements the McKinsey 7-S modelasafeiran
The diagram for the 7-S model looks like a spider-web, with
each of the ‘S’s’ connecting with all the other six. The BSC
strategy map illustrates cause-and-effect linkages across its
four perspectives. Both help managers align their organization
for effective strategy execution
Robert Browning and Elizabeth Barrett were a famous poet couple who married in 1846 against her father's wishes and moved to Italy. They admired each other's work and had one son together. Both were renowned Victorian poets, with Elizabeth known for works like Sonnets from the Portuguese and Aurora Leigh, and Robert for poems like Men and Women and My Last Duchess.
Diagnosing and solving organizational problems means looking
not merely to structural reorganization for answers but to a
framework that includes structure and several related factors.
La cerimonia di consegna dei premi si é svolta mercoledì 22 marzo 2017 a Milano. Nella presentazione le Aziende Vincitrici per ciascuna categoria di premi.
Este documento describe los elementos básicos de la composición, incluyendo formas, tamaño, posición, proporción, dirección y tipos de movimientos compositivos. Explica que las formas son elementos visibles delimitados por un contorno que existen en el espacio. Describe diferentes tipos de relaciones entre elementos como la ubicación, tamaño, posición, proporción y dirección, y cómo estos contribuyen a crear composiciones estáticas, dinámicas, envolventes e integradoras. El objetivo es mostrar cómo los elementos se distribuyen en
Streaming Cyber Security into Graph: Accelerating Data into DataStax Graph an...Keith Kraus
Traditional security tools like security information and event managers (SIEMs) are struggling to keep up with the terabytes of event data (250M to 2B events) being generated each day from an ever-growing number of devices. Cybersecurity has become a data problem, and enterprises need to reply with scalable solutions to enable effective hunting and combat evolving attacks. Rethinking the cybersecurity problem as a data-centric problem led Accenture Labs’s Cybersecurity team to use emerging big data tools along with new approaches such as graph databases and analysis to exploit the connected nature of the data to its advantage. Joshua Patterson, Michael Wendt, and Keith Kraus explain how Accenture Labs’s Cybersecurity team is using Apache Kafka, Spark, and Flink to stream data into Blazegraph and Datastax Graph to accelerate cyber defense.
Leveraging Datastax Graph and Blazegraph allows Accenture Labs to greatly accelerate query and analysis performance compared to traditional security tools like SIEM. Josh, Michael, and Keith share the challenges of fitting cybersecurity data into each of the graph structures, as well as the ways they exploited the connectedness of events to discover new threats that would have been missed in traditional SIEM tools. In addition, they explain how they use GPUs to accelerate graph analysis by using Blazegraph DASL. Josh, Michael, and Keith end by demonstrating how to efficiently and effectively stream data into these graph databases using best-in-breed technologies such as Apache Kafka, Spark, and Flink and touch on why Kudu is becoming an integral part of Accenture’s technology stack. Utilizing these technologies, clients have supercharged their security analysts’ cyber-hunting abilities and are uncovering threats faster.
This presentation outlines an approach for measuring gender bias in advertising. Called the Gender Equality Index, this was developed by the company Advertising Benchmark for the ANA or Association of National Advertising
El documento analiza el desempeño financiero de Grupo Aval, el grupo financiero más grande de Colombia, durante el período 2006-2010. Se examinan métricas como ventas, utilidad neta, rotación de cartera y proveedores. El documento concluye que Grupo Aval es una buena opción de inversión debido a su sólida posición financiera y de mercado, pero debe innovar y diferenciarse para enfrentar la creciente competencia.
Get Ahead of Cyber Security by Tiffy Issac, Partner EY IndiaRahul Neel Mani
Internet of Things “IoT” can be defined as physical objects that connect to the internet through embedded systems and sensors, interacting with it to generate meaningful results and convenience to the end-user community. According to industry estimates, machine-to-machine communications
alone will generate approximately US$900 billion in revenues by 2020.
Citi prime services report on liquid alternativesBrian Shapiro
Institutional investors' views of hedge funds have evolved from seeing them as satellite holdings to core portfolio components used to dampen volatility and provide "insurance." More investors now allocate to hedge funds to manage risks in their equity and bond holdings. Demand for liquid alternatives is growing significantly from both retail and some institutional investors, driven by regulations and changing wealth manager dynamics. Products are expected to trade in parallel with private funds, allowing managers to offer more liquid strategies while still utilizing their full investment talent. This is expanding the concept of active management across traditional and alternative managers.
An alternative perspective to EM investing: The case for an industry allocati...Jean Meilhoc Ricaume
Investors have long recognised the compelling opportunity offered by emerging markets equities. Yet while returns from the asset class have considerably outperformed developed markets equities over previous market cycles, they have tended to be more volatile, severely testing investors’ resolve. Rather than attempting to time market allocations, or select regions or specific countries to over- or underweight, we believe that our proprietary emerging markets macro growth indicators and skill in identifying industry performance relative to them may offer investors a differentiated source of returns.
The document provides an outlook on the commercial real estate market in 2016. Some key points:
1) Fundraising remained strong in 2015 and the move toward larger funds continues, with opportunistic and value-added funds performing well. The search for opportunities continues as investors seek deals in new sectors.
2) Foreign investors remain attracted to the US market as a safe haven and are partnering with smaller US funds on secondary and tertiary market deals. Regulation A+ may provide a new avenue for real estate crowdfunding.
3) Data analytics and technology are starting to transform operations, while cybersecurity needs to become a higher priority as real estate assets become more connected.
4) The relentless
The paper opens with an overview of the
commodity trading advisor (CTA) sector, highlighting the
significant growth that has taken place in the managed
futures industry in recent years and explaining how
the managed futures strategies that CTAs employ
work in practice. The breadth of sub-strategies under
the managed futures umbrella are then examined.
The third part of the paper examines the benefits and
perceived risks to investors of allocating to managed
futures strategies and also addresses various common
misunderstandings about CTAs.
The paper concludes by exploring the common ways
as to how investors can access the various investment
strategies that are available
The mainstreaming of alternative investmentsIwan Suryadi
- Alternative investments have doubled in AUM globally since 2005 to $6.5 trillion in 2011, growing much faster than traditional assets. Growth is expected to continue driven by increasing allocations from institutional and retail investors.
- Alternatives are moving into the mainstream investment market due to increasing adoption by retail investors, a shift from relative to absolute return benchmarks, and convergence of traditional and alternative products. This is fueling the next wave of growth in asset management.
- Mainstreaming is occurring through regulated retail investment vehicles that package alternative strategies for individual investors, growing the U.S. retail alternatives market to $700 billion or 7% of long-term retail fund AUM.
The document summarizes private markets fundraising trends in 2017. Some key points:
- Private markets fundraising reached a record $750 billion globally in 2017, driven primarily by a surge in US buyout megafunds (funds over $5 billion).
- US buyout megafunds raised $173.7 billion in 2017, a 93% increase from 2016. This surge accounted for most of the overall private markets fundraising growth.
- Investors continue to allocate heavily to private markets like private equity due to the potential for higher returns compared to public markets. Pension funds and sovereign wealth funds see private markets as a way to address underfunding issues and volatility.
The document examines the asset management industry in Asia Pacific, focusing on market size and growth, asset allocation, regulation, and internationalization of fund management. It discusses key areas of the industry including mutual funds, pension funds, wealth management, and exchange traded funds. Emerging trends are driving growth in the region such as rising wealth among individuals and countries. While opportunities exist, asset managers also face challenges relating to regulation, operations, technology, and attracting talent. Overall the Asia Pacific asset management industry is poised for continued expansion in the coming years.
The UK investment management industry is at a turning point. Traditional active managers have already had to adapt to changes in the institutional market, but now they face a confluence of trends – from regulation to pension auto-enrolment to the growth of passive investing – that could radically reshape the retail side of their industry as well.
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The document discusses several challenges and opportunities facing global securities firms. It notes that while last year's results were good, the industry faces evolving businesses that require new strategies. Successful firms will serve both large companies seeking strategic advice and the growing middle market. They will also adapt to changing relationships with large clients, financial sponsors, and hedge funds as private and public boundaries blur. Firms will need new models to serve sponsors and uncover investment opportunities, while also advising companies on private vs. public financing options. Overall the industry faces pressure to develop innovative solutions across client segments.
DealMarket Digest Issue116 - 8th November 2013Urs Haeusler
- PE Eyes Multi-billion Investment in German-owned Oil & Gas Unit
- New Study Reveals Emerging PE Trends and a Major Shift
- PE Outperformance: Insight into Returns at Top US Pension Funds
- Insurance Industry M&A Trends Downwards: A Global Multi Year View
- PE Industry Sees Recovery But Increasing Competition
- Quote of the Week: Seismic Strategy Shifts
This paper discusses how institutional-quality hedge funds possess a much greater risk/reward pay off then the leading liquid alternative funds can offer.
C
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SP
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B
EN
SO
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/G
ET
TY
IM
A
G
ES
STRATEGY
IN THE AGE OF
SUPERABUNDANT
CAPITAL
MONEY IS NO LONGER A SCARCE RESOURCE.
THAT CHANGES EVERYTHING.
BY MICHAEL MANKINS, KAREN HARRIS,
AND DAVID HARDING
66 HARVARD BUSINESS REVIEW MARCH–APRIL 2017
most of the past 50 years, business leaders viewed fi-
nancial capital as their most precious resource. They
worked hard to ensure that every penny went to fund-
ing only the most promising projects. A generation
of executives was taught to apply hurdle rates that
reflected the high capital costs prevalent for most
of the 1980s and 1990s. And companies like General
Electric and Berkshire Hathaway were lauded for the
discipline with which they invested.
Today financial capital is no longer a scarce
resource—it is abundant and cheap. Bain’s Macro
Trends Group estimates that global financial capital
has more than tripled over the past three decades and
now stands at roughly 10 times global GDP. As capital
has grown more plentiful, its price has plummeted.
For many large companies, the after-tax cost of bor-
rowing is close to the rate of inflation, meaning that
real borrowing costs hover near zero. Any reasonably
profitable large enterprise can readily obtain the capi-
tal it needs to buy new equipment, fund new product
development, enter new markets, and even acquire
new businesses. To be sure, leadership teams still need
to manage their money carefully—after all, waste is
waste. But the skillful allocation of financial capital is
no longer a source of sustained competitive advantage.
The assets that are in short supply at most compa-
nies are the skills and capabilities required to translate
good growth ideas into successful new products, ser-
vices, and businesses—and the traditional financially
driven approach to strategic investment has only com-
pounded this paucity. Indeed, the standard method
for prioritizing strategic investments strives to limit
the field of potential projects and encourages compa-
nies to invest in a few “sure bets” that clear high hur-
dle rates. At a time when most companies are desper-
ate for growth, this approach unnecessarily forecloses
too many options. And it encourages executives to
remain committed to investments long after it’s clear
that they’re not paying off. Finally, it leaves companies
with piles of cash for which executives often find no
better use than to buy back stock.
Strategy in the new age of capital superabundance
demands a fundamentally different approach from the
traditional models anchored in long-term planning
and continual improvement. Companies must lower
hurdle rates and relax the other constraints that reflect
a bygone era of scarce capital. They should move away
from making a few big bets over the course of many
years and start making numerous small and varied
investments, knowing that not all will pan out. They
must learn to quickly spot—and get out of—losing
ventures, while ag ...
MintKit Growth Index: A Benchmark of the Stock Market for Sprightly Growth at...MintKit Institute
The document describes the MintKit Growth Index, which aims to provide ample growth at modest risk by selecting large-cap stocks in growing markets and sectors. It overviews the index's methodology, which involves equal weighting, fundamental and technical analysis, and both quantitative and qualitative screening. The final roster includes 10 stocks across various industries. The index is intended to outperform broad benchmarks like the S&P 500 by favoring undervalued, high-growth companies.
Capital Relief Trades Deal Pipeline
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Much of the world has experienced significant increases in economic prosperity in the past three decades. However, the global wealth management environment has never been more challenging, nor fraught, with the potential for misstep. These pressures facing the wealth management industry are well recognized and much continues to be written about them. However, less is written about the key positive elements of change and, more importantly, what is needed to sustain these attributes of “new thinking" in wealth management
Mergers and acquisitions in the banking sector: the role of the institutional...Alberto Asquer
This document summarizes a study examining how political institutions affect mergers and acquisitions (M&A) in the banking sector. The study analyzed over 6,800 M&A deals from 50 countries between 1983-2010. Political governance indicators were used to represent institutional environment. Regression models found that domestic M&A numbers and values were higher in countries with more "contestable" political regimes, characterized by electoral competitiveness and pluralism. However, the relationship was weaker for cross-border M&As. The findings provide partial support that institutional factors influence M&A activity in the financial sector.
Today's crowded and ever-growing private equity market means that buyout multiples continue to rise, making the deployment of capital a persistent challenge.
Lu en-10-disruptors-wealth-management-102015Thierry Raizer
The document outlines 10 disruptive trends that will change the global wealth management industry. These trends revolve around evolving investor needs, digital transformation, and an increasingly complex market environment. A key trend is the shift to a new generation of investors with different preferences who expect a simpler and more engaging experience. They are looking for holistic advisory solutions. Additionally, the industry is experiencing increased digitalization due to technologies like robo-advisors and the use of big data. The market has also become more complex with new regulations, competition from specialized players, and pressure on profit margins. These trends particularly impact Luxembourg players and those who adapt successfully will secure their position for the future.
The document examines how the shift from active to passive investing affects financial stability. It finds that the shift both increases and decreases certain risks:
1) The growth of ETFs, which are largely passive and do not redeem in cash, has likely reduced risks from liquidity transformation and destabilizing redemptions compared to mutual funds.
2) However, some passive strategies like leveraged ETFs amplify market volatility.
3) The shift has also increased asset management industry concentration, potentially exacerbating risks from operational problems at large firms.
4) Evidence is mixed on whether passive investing increases comovement of asset returns and liquidity through "index inclusion effects."
Similar to Mckinsey company - Capturing the next wave of growth in alternative Investments (20)
The Africa Progress Report (APR) is the annual flagship publication of the Africa
Progress Panel. The APR draws on the best research and analysis available on
Africa and compiles it in a refreshing and balanced manner. The Panel makes policy
recommendations for African political leaders and civil society who collectively have the
primary responsibility for spurring Africa’s progress. In light of the continent’s dynamic
links with the rest of the world, the APR also highlights critical steps that must be taken by
leaders in the international public and private sector.
Baseline Renewable Energy - Africa Databaseasafeiran
facilitate the widespread introduction of renewable energy projects in the region that are sustainable and contribute towards the availability of locally generated energy in COMESA
• Consumer expenditure in SSA
equaled nearly $600 billion in
2010, accounting for almost eight
percent of all emerging-market
spending, and is expected to reach
nearly $1 trillion by 2020.
• Consumer spending in South
Africa and Nigeria accounts for 51
percent of SSA's total expenditure.
• Poverty in SSA is decreasing
rapidly—from 40 percent in 1980 to
less than 30 percent in 2008—and is
expected to fall to 20 percent by 2020.
• By 2050, almost 60 percent of
people in SSA will live in cities,
compared with 40 percent in 2010.
This means 800 million more people
will live in urban environments.
• By 2012, over 50 percent of all
Africans—or more than 500 million
people—will own a mobile phone.
By 2014, this portion is expected to
increase to 56 percent (more than 600
million people), giving Africa one of
the world’s highest mobile usage rates.
The long-term growth outlook for Africa appears bright. With a large and growing, young and increasingly wealthy population, Africa has a demographic advantage that few other parts of the world will be able to match over the coming decades. The rise of non-traditional economic
sectors, such as the telecoms industry, and the growth of service industries supporting the expanding middle class, should help African economies to diversify and become less dependent on commodities, aiding their long-term development.
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Grain Fish Money Financing Africa’s Green and Blue Revolutions 2014asafeiran
The annual Africa Progress Report is the flagship publication of the Africa Progress
Panel. Published every year in May, the report draws on the best research and analysis
available on Africa and compiles it in a refreshing and provocative manner. Through
the report, and as part of its overall mission of promoting transformative change in
Africa, the Panel makes viable, policy recommendations for African policy makers who
have responsibility for Africa’s progress, and for international partners and civil society
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Inclusive Green Growth in Zambia - Scoping the Needs and Potentialsasafeiran
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Private Equity Investment in Africa - In Support of Inclusive and Green Growt...asafeiran
!e African Development Bank Group uses Private Equity
Funds to invest in a diverse range of African enterprises,
supporting them in their expansion and giving them the capital and the expertise to grow, creating jobs and driving economic growth. !e funds to which the Bank has committed are invested in 294 individual companies across the continent.
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This document summarizes Ernst & Young's 2013 Africa Attractiveness Survey. Some key points:
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- There has been a shift in FDI toward sub-Saharan Africa and away from North Africa due to political issues. Countries attracting more investment include Ghana, Nigeria, Kenya, Tanzania, Rwanda, Mozambique, Mauritius and South Africa.
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Banking in sub-Saharan Africa - Challenges and Opportunitiesasafeiran
This study was prepared for the EIB’s Roundtable Discussion on Banking in sub-Saharan Africa. It was
put together by the EIB’s Economics Department to support the Bank’s new initiatives in the region’s
banking sector and to contribute to a better understanding of the recent market developments in the
sector.
How China is influencing Africa's Developmentasafeiran
This document discusses China's increasing engagement with Africa over the past decade. It poses three questions about China's impact on Africa's development: 1) Will China help African industrialization? 2) Does China's model of concessional finance offer a new approach for Africa's extractive industries? 3) Will China's infrastructure investments help integrate Africa's economies? After decades of reduced involvement, China is now a major investor and partner in Africa as its companies look abroad and its policy banks provide loans for commodities and projects.
Global Risks 2014 - The World Economic Forumasafeiran
Objectives of the Global Risks 2014 Report:
The world faces risks that can be addressed only by
long-term thinking and collaboration among business,
governments and civil society. The Global Risks 2014
report aims to support this process by:
– exploring the nature of systemic risks
– mapping 31 global risks according to the level of
concern they arouse, their likelihood and potential
impact, as well as the strength of the
interconnections between them
– looking in-depth at the ways in which three
constellations of global risk – centred on youth,
cyberspace and geopolitics – could interplay and
have systemic impact
The roles and opportunities for the private sector in Africa’s agro food indu...asafeiran
The study commissioned by the United Nations
Development Programme’s (UNDP) African Facility
for Inclusive Markets (AFIM) seeks to identify the roles
and opportunities for the private sector in Africa’s
agro-food industry. It focuses on successful inclusive
market development models in Africa and highlights
the incentives required for the private sector to capture
business opportunities and deepen investment in
the agro-food sector. Furthermore the study explores
mechanisms through which the private sector can engage
smallholder farmers and turn them from subsistence
farmers into viable agri-enterprises.
Red Sea - Dead Sea Water Conveyance - Feasibility Study - report summaryasafeiran
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Draft Final Feasibility Study Report
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This document provides guidelines for conducting water sector governance assessments in Africa to improve the sustainability of water projects. It outlines six stages of the project cycle and the appropriate assessment tool to use at each stage. These include a light assessment for initial overview, rapid assessment to identify risk areas, and a more comprehensive project preparation assessment. The project preparation assessment informs the project appraisal report, indicators for project supervision, and outcomes for project completion. Scoring guidelines are provided to identify priority areas of governance concern requiring attention in a project. The assessments are designed to characterize governance and mitigate risks at all stages of the project cycle from identification to completion.
During the budget session of 2024-25, the finance minister, Nirmala Sitharaman, introduced the “solar Rooftop scheme,” also known as “PM Surya Ghar Muft Bijli Yojana.” It is a subsidy offered to those who wish to put up solar panels in their homes using domestic power systems. Additionally, adopting photovoltaic technology at home allows you to lower your monthly electricity expenses. Today in this blog we will talk all about what is the PM Surya Ghar Muft Bijli Yojana. How does it work? Who is eligible for this yojana and all the other things related to this scheme?
Ellen Burstyn: From Detroit Dreamer to Hollywood Legend | CIO Women MagazineCIOWomenMagazine
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50 million companies worldwide leverage WhatsApp as a key marketing channel. You may have considered adding it to your marketing mix, or probably already driving impressive conversions with WhatsApp.
But wait. What happens when you fully integrate your WhatsApp campaigns with HubSpot?
That's exactly what we explored in this session.
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3. Contents
2
6
13
22
28
Executive Summary
An Alternatives Boom Built to Last
The Granularity of Growth in the
Alternatives Market
A Rapidly Evolving Competitive Landscape,
With Room for New Leaders
Thriving in the Converging Alternatives Market:
Six Imperatives for Management
4. 2 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Executive Summary
2
Investment trends come and go, so it may be tempting to
think of the current rush to alternatives as a passing fad. On
the one hand, money has continued to pour into the
category—which McKinsey defines to include hedge funds,
funds of funds, private equity, real estate, commodities and
infrastructure—over the past three years, with global assets
hitting an all-time high of $7.2 trillion in 2013. And with their
premium fees, alternatives now account for almost 30
percent of total industry revenues, while comprising only 12
percent of industry assets. Yet returns for many alternatives
products have lagged the sharp gains of broader market
indices in recent years, leading skeptics to contend that
investor patience is wearing thin—and that the alternatives
boom is about to run out of steam.
To the contrary, McKinsey research clearly indicates that the
boom is far from over. In fact, it has much more room to
5. 3The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments 3
run, as alternatives become increasingly
entrenched in investor portfolios. Institu-
tional investors—who control approximately
60 percent of the money flowing into alter-
natives—have not only upped their alloca-
tions to alternatives over the past few
years, but the vast majority intend to either
maintain or increase them over the next
three years. Retail investors, meanwhile, are
moving rapidly into the market, as new
product vehicles provide unprecedented
access to a broad range of alternatives
managers and strategies. Structural, rather
than cyclical, forces are accelerating the
adoption of alternatives, chief among them
the linking of alternatives to critical invest-
ment outcomes—a phenomenon that takes
the value of alternatives strategies “beyond
alpha.” Gone are the days when the sole
attraction of alternatives was the prospect
of high-octane performance. The market
meltdown caused by the global financial
crisis, coupled with the extended period of
volatility and macroeconomic uncertainty
that followed, have left their marks, and in-
vestors are now turning to alternatives for
consistent, risk-adjusted returns that are
uncorrelated to the market. They are also
increasingly looking to alternatives to deliver
on other crucial outcomes like inflation pro-
tection and income generation.
For asset managers, the continued rise
of alternatives represents one of the
largest growth opportunities of the next
five years. And in stark contrast to tradi-
tional asset management, the alterna-
tives market remains highly fragmented,
with ample room for new category lead-
ers to emerge. Within the hedge fund
and private equity asset classes, for in-
stance, the top five firms by global as-
sets collectively captured less than 10
percent market share in 2012—a far cry
from the 50 percent share enjoyed by
the top five firms competing in traditional
fixed-income and large-cap equity. The
competitive landscape is also rapidly
evolving. The mainstreaming of alterna-
tives is now driving a “trillion-dollar con-
vergence” of traditional and alternative
asset management. Leading hedge
funds, private equity firms and traditional
asset managers—which to date have oc-
cupied distinct niches in the investment
management landscape—will increas-
ingly battle for an overlapping set of
client and product opportunities in the
growing alternatives market.
This report draws on the findings of
McKinsey’s 2013-2014 Alternative Invest-
ment Survey, which polled nearly 300 in-
For asset managers,
the continued rise of alternatives
represents one of the largest
growth opportunities of the
next five years. And in stark
contrast to traditional asset
management, the alternatives
market remains highly fragmented,
with ample room for new category
leaders to emerge.
6. 4
stitutional investors managing $2.7 trillion
in total assets and included more than 50
interviews with a cross section of in-
vestors by size and type. It also builds on
McKinsey’s ongoing research into the
growth of the retail alternatives market
and the insights published in our 2012 re-
port, The Mainstreaming of Alternative In-
vestments. Key findings from our most
recent research include the following:
■ Over the next five years, net flows in the
global alternatives market are expected
to grow at an average annual pace of 5
percent, dwarfing the 1 to 2 percent ex-
pected annual pace for industry as a
whole. By 2020, alternatives could
comprise about 15 percent of global in-
dustry assets and produce up to 40
percent of industry revenues.
■ The next wave of growth in alternatives
will be driven disproportionately by a
“barbell” comprised of large, sophisti-
cated investors who are experienced al-
ternatives investors and smaller
investors who are “first-time buyers.”
Specifically, flows to alternatives from
four segments of investors—large pub-
lic pensions and sovereign wealth
funds, smaller institutions and high-net-
worth/retail investors—could grow by
more than 10 percent annually over the
next five years.
■ Growth in alternatives is playing out as
“a tale of two cities,” with divergent in-
vestment priorities and manager prefer-
ences emerging across different
investor segments. Larger, more so-
phisticated investors (e.g., institutions
with more than $10 billion in assets
under management [AUM]) reveal a
clear bias towards specialist investment
managers and alternatives boutiques
that offer unique insights and market
exposures. At the other end of the
spectrum, smaller, less established in-
vestors (e.g., those with under $2 billion
in AUM and core retail channels) have a
strong preference for the breadth and
stability of larger managers and the
comfort of established brands.
■ Liquidity preferences are evolving and
reshaping product priorities. Hedge
funds and other liquid alternatives will
continue to experience robust demand
from virtually all investor types. But
larger, more sophisticated investors will
invest further down the liquidity spec-
trum, with the vast majority planning to
increase their allocations to more spe-
cialized private-market asset classes—
real estate, infrastructure, and other real
assets such as agriculture and timber—
over the next three years.
■ Retail alternatives will be one of the
most significant drivers of U.S. retail
asset management growth over the
next five years, accounting for up to 50
percent of net new retail revenues. In
addition to growth in institutional alter-
native strategies and vehicles, McKin-
sey expects absolute return, long/short
and multi-alternative strategies in mu-
tual fund formats to grow disproportion-
ately over the next two to three years.
New product development and smart
distribution will remain critical to captur-
ing growth opportunities and market
share in the retail alternatives market.
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
7. 5
■ Traditional and alternative asset man-
agement will continue to dovetail, lead-
ing to a “trillion-dollar convergence.”
Four successful alternatives manager
archetypes will emerge in this environ-
ment, each with a distinct value propo-
sition: diversified asset managers,
multi-alternative mega firms, specialist
alternatives platforms and single-strategy
boutiques. While specialist firms will
continue to play a significant role in the
alternatives industry, McKinsey ex-
pects ongoing share gains by larger,
at-scale managers, as the industry
continues to mature.
The ongoing integration of alternatives
into the core of both retail and institutional
portfolios will represent one of the most
attractive growth opportunities for asset
managers in the coming five years. It is an
opportunity that will change the competi-
tive dynamics of the industry as the busi-
ness models and strategies of traditional
and alternatives managers converge. For
the many asset managers who are dab-
bling in alternatives, or for alternatives
managers who compete only in a narrow
market niche, the time has come to de-
cide whether to commit and invest in a
well-defined strategy. As the convergence
accelerates, successful firms will make
deliberate choices about how to position
themselves favorably against a new set of
tailwinds that are driving growth.
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
8. 6 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
1
Excludes $0.9 trillion of fund of
fund assets and ~$2 trillion of
retail alternatives. See appendix
for detailed definitions of
alternative investments used in
this paper.
Viewed through the narrow lens of short-term relative
returns, the alternatives boom presents somewhat of a
paradox. Money has continued to pour into alternatives
over the past three years, with assets hitting a record high
of $7.2 trillion in 2013.1
The category has now doubled in
size since 2005, with global AUM growing at an annualized
pace of 10.7 percent—twice the growth rate of traditional
investments (Exhibit 1). New flows into alternatives, as a
percentage of total assets, were 6 percent in 2013,
dwarfing the 1 to 2 percent rate for non-alternatives. Yet,
recent returns for alternatives products have generally
lagged the broader market indices. The average hedge
fund, for instance, produced an 11 percent return in 2013,
while the S&P 500 Index soared by 30 percent.
But the demand for alternatives is not a short-term
phenomenon. Indeed, just as impressive as the absolute
An Alternatives Boom
Built to Last
9. 7The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
growth of alternative assets is the de-
gree to which they are now entrenched
as a standard component of almost
every investment portfolio. Among insti-
tutional investors—who control about 60
percent of the category’s assets—alter-
natives comprised approximately one-
quarter of total portfolio assets in 2013,
a proportion that has steadily increased.
And while they were once an exclusive
preserve of sophisticated investors like
large pension funds and endowments,
alternatives increasingly feature as the
core engines of alpha and drivers of di-
versification for a range of smaller insti-
tutions and retail investors. Growth has
taken place across every alternative
asset class, but has been particularly ro-
bust in direct hedge funds, real assets
and retail alternative sold through regis-
tered vehicles like mutual funds and
ETFs (Exhibit 2, page 8). Even private
equity, where assets retreated from pre-
crisis highs, has bounced back in its new
fund-raising.
Four structural trends are driving
alternatives’ growth
McKinsey research indicates that the rapid
growth of alternatives is not simply the re-
sult of investors chasing returns. Powerful
structural forces are accelerating the
adoption of alternatives, chief among them
the matching of alternatives with critical in-
vestment outcomes—transforming the
value of these strategies “beyond alpha.”
Gone are the days when the primary at-
traction of hedge funds was the prospect
of high-octane performance, often
achieved through concentrated, high-
stakes investments. Shaken by the global
financial crisis and the extended period of
market volatility and macroeconomic un-
certainty that followed, investors are now
2011
52.0
2010
51.6
2009
48.1
2008
42.9
2007
Alternatives1
63.9
56.7
7.2
50.2
45.7
6.3
45.7
5.9
42.8
5.3
37.9
5.0
46.0
42.8
5.0 6.8
Traditional
investments
20132012
57.0
50.9
2006
46.9
4.1
2005
40.3
3.2
37.1
10.7%
5.4%
Global AUM, 2005-13
$ trillions
CAGR
2005-13
Alternative
investments
have grown
twice as fast as
non-alternatives
since 2005
Exhibit 1
1
Does not include retail alternatives (i.e., mutual funds, ETFs, and registered closed end funds).
Source: McKinsey Global Asset Management Growth Cube; Preqin; HFR
10. 8 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
seeking consistent, risk-adjusted returns
that are uncorrelated to the market. They
are also looking for solutions to needs they
see on the horizon, including interest rate
risk mitigation, inflation protection, income
generation and tail risk protection.
Specifically, a set of four structural trends
are driving increased allocations to alter-
native asset classes:
1. Disillusionment with traditional
asset classes and products in an era
of increased volatility and macroeco-
nomic uncertainty. An increasing number
of investors are now using alternatives
(particularly hedge funds) as an “insurance
policy” to dampen portfolio volatility and
generate a steady stream of returns. De-
mand for alternative credit products has
also been strong, driven by challenges
posed to long-only strategies in the current
low (but highly uncertain) rate environment.
2. Evolution in state-of-the-art port-
folio construction. A growing pool of
investors is gravitating towards the no-
tion of “bar-belling” in their investment
portfolios; that is, complementing the
low-cost beta achieved through index
strategies with the “diversified alpha” and
“exotic beta” of alternatives. Many of the
most sophisticated institutions are begin-
ning to abandon traditional asset-class
definitions and embrace risk-factor-
based methodologies, a trend that repo-
sitions alternatives from a niche
allocation to a central part of the portfo-
lio. Hedge funds, for instance, are now
considered by a growing number of
these investors to be part of a larger pool
of equity and fixed-income allocations.
3. Increased focus on specific invest-
ment “outcomes.” The shift from relative-
return benchmarks to concrete outcomes
Hedge funds
Private equity
Real assets
Total$7.2
$6.3
$4.9
$3.2
2013201120082005
10.7%
9.1%
11.4%
11.3%
$0.5 $0.8 $0.9 $0.9 5.6%Fund of funds
$0.8 $1.1 $1.7 $2.0 12.6%Retail alternatives1
Growth
of traditional
assets =
5.4%
1.1 1.4
2.0
2.6
1.1
1.0
1.9
1.6
2.3
2.1
2.1
2.4
Global AUM of key alternative asset classes, 2005-2013
$ trillions
CAGR
2005-13
Growth has been
broad-based
across alternative
asset classes,
with direct hedge
funds and retail
alternatives
accelerating
fastest
Exhibit 2
1
Vehicles providing non-accredited investors with exposure to alternatives strategies via registered vehicles: mutual funds, closed-end funds and ETFs.
Source: McKinsey Global Asset Management Growth Cube; Preqin; HFR
11. 9The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
tied to specific investor needs has created
a new tailwind for alternatives. Alternative
strategies are seen as more precise tools
that can deliver a range of “solutions”—for
example, real estate and infrastructure as
sources of inflation-protected income, or
hedge funds as a tool to manage volatil-
ity—that investors are demanding.
4. Allocations out of “desperation
rather than desire.” A portion of incre-
mental institutional demand is being
driven by persistent asset-liability gaps at
defined benefit pension plans, where
funding ratios continue to hover around
75 percent. With many of these plans as-
suming, for actuarial and financial report-
ing purposes, rates of return in the range
of 7 to 8 percent—well above actual re-
turn expectations for a typical portfolio of
traditional equity and fixed-income as-
sets—an increasing number of plan spon-
sors are being forced to place their faith in
higher-yielding alternatives.
Alternatives allocations will
continue to increase, across all
investor types
Taken together, these four structural trends
will translate into continued robust demand
for alternatives. McKinsey research reveals
that large and small institutional investors
alike expect to increase their allocations to
alternatives over the next three years. In
the aggregate, the investors McKinsey sur-
veyed expect alternatives to account for an
average of 26.2 percent of their total port-
folio assets by the end of 2016, up from
25.1 percent in 2013 (Exhibit 3). Institu-
tions with at least $10 billion in AUM ex-
pect their alternatives allocations to top 29
percent by 2016, a full 5 percentage points
above 2013 levels.
Alternatives
Equity
Fixed
income
2016E
26.2
43.9
30.0
2013
25.1
43.0
31.9
2016E
29
2013
27
2013 2016E
29.4
24.4
$0.5 billion to $1 billion total AUM
>$10 billion total AUM
Overall asset allocation1
Average percent of total portfolio AUM
Alternatives allocation by institution size1
Average percent of total portfolio AUM
Over the next
three years,
demand for
alternative
investments will
remain robust,
with large and
small institutions
alike boosting
allocations
Exhibit 3
1
Survey results exclude institutions with less than 10% of portfolio invested in alternative assets.
Source: 2013/14 McKinsey Alternative Investments Survey
12. 10
The ongoing shift towards alternatives will
not be confined to any one type of in-
vestor. Across all classes of institutional in-
vestors—including public pensions,
corporate pensions, endowments, founda-
tions and insurance companies—interest in
alternatives will remain at all-time highs,
with more than 75 percent of these in-
vestors expecting to maintain or make
meaningful additions to their alternatives
portfolios over the next three years (Exhibit
4). Among institutions expecting to in-
crease alternatives allocations over the
next three years, the expected average in-
crease will be almost 7 percentage points.2
Alternatives are now a crucial
source of industry flows and
revenues
In stark contrast to traditional asset man-
agement—where market appreciation has
been the primary source of asset growth
in recent years—growth in alternatives
has been driven primarily by new flows.
McKinsey estimates that net flows in the
global alternatives market will continue to
grow at an average annual pace of 5 per-
cent over the next five years, dwarfing the
1 to 2 percent expected annual pace for
the industry as a whole.
More importantly, alternatives are now a
crucial source of revenue growth in an in-
dustry where traditional actively managed
products face the constant threat of com-
moditization and margin compression. As
managers face unrelenting fee pressures
for most traditional products, pricing for
alternatives is holding relatively firm. For
instance, 80 percent of institutional in-
vestors McKinsey surveyed expect the
management fees they pay hedge funds
over the next three years will either remain
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Corporate defined
benefit
67%42% 26%
Taft-Hartley 75%44% 31%
Insurance general
account & other 85%54% 31%
Endowment/
foundation
87%63% 23%
Public defined
benefit
88%57% 31%
Total 78%51% 27%
+6.6
+7.8
+7.5
+6.2
+6.1
+6.7
Maintain Increase
Expected change
through 20161
Percentage points
Institutions expecting to maintain or increase
alternatives allocations over the next three years
Percent of institutions by type
Three-quarters
of investors
expect to
maintain or
increase their
alternatives
allocations over
the next three
years
Exhibit 4
1
Among institutions expecting to increase alternative allocations over the next 3 years.
Source: 2013/14 McKinsey Alternative Investments Survey
2
Corporate pension funds were one
notable exception among the
group surveyed, with a significant
minority – generally those who
were considering pension risk
transfer or liability-driven
investing programs – indicating
some possibility of scaling back
their alternatives allocations.
13. 11The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
at current levels or, in a small number of
cases, increase. And few expect any
changes to performance fee levels, al-
though almost half do expect to see
structural changes to improve incentive
alignment between managers and their in-
vestors—for example, a move from simple
high-water marks to a greater use of
clawbacks. Healthy revenue yields have
also held up in the retail segment. Com-
pared with the two other major product
growth opportunities in retail asset man-
agement, ETFs and target-date funds, al-
ternatives command a significantly higher
revenue margin—more than two times
greater than target-date funds and four
times greater than ETFs.
The upshot is that alternatives now ac-
count for a disproportionate share of in-
dustry revenues, a state of affairs that
McKinsey expects will continue. In 2013,
alternatives accounted for about 12 per-
cent of global industry assets but gener-
ated one-third of revenues. By 2020,
alternatives will comprise about 15 percent
of global industry assets and produce up
to 40 percent of industry revenues, as the
category continues to siphon flows from
traditional products (Exhibit 5).
The imperative for sound
stewardship
How this growth scenario plays out will be
highly contingent on the sound steward-
ship of industry leaders. The relative rich-
ness of fee levels puts the onus on asset
managers to demonstrate why alterna-
tives exist and how they benefit in-
vestors—not just investment managers.
This will require a fiduciary mind-set, the
disciplined pursuit of differentiated
strategies that add clear value, thought-
fulness in the alignment of incentives and
40%
14%
30%
7%
9%
33%
11%
12%
35%
8%
15%
18%
19%
26%
12%
14%
23%
28%
21%24%
Alternatives
Active fixed income
Balanced/multi-asset
Active equities
Cash and passive
2020E1
~$98T
2013
~$64T
Assets under
management
~$420B
2020E2013
~$270B
Estimated revenue pool1
Global asset management market (externally managed assets)By 2020,
alternatives could
account for
about 40% of
revenues in the
global asset
management
industry
Exhibit 5
1
Excludes performance fees (i.e., carried interest).
Source: McKinsey Global Asset Management Growth Cube
14. 12
a commitment to high standards of in-
vestor education, product transparency
and regulatory compliance.
In short, asset managers that are active in
the alternatives market need to ensure
that they are delivering quality investment
solutions that meet investor needs. The
growth of the alternatives market and the
extension of alternative strategies to
smaller investors (e.g., retail segments)
has already attracted some regulatory
scrutiny. Failure on the part of the alterna-
tives industry to retain the confidence of
its key stakeholders could result in the
disruption of some of the positive growth
trends described above.
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
15. 13The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
As the powerful structural trends described in the
previous chapter continue to play out, McKinsey expects
flows to alternative assets to remain robust across all
major client segments in the coming years. That said, our
research suggests that the next wave of growth in
alternatives will be disproportionately driven by a “barbell”
comprised of large, sophisticated investors that are
already significant alternatives users, and smaller
investors who are relatively unfamiliar with the asset class.
Four segments of investors are likely to account for a
disproportionate share of alternatives growth over the
next five years (Exhibit 6, page 14).
The Granularity of
Growth in the
Alternatives Market
16. 14 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
• Large public pensions are struggling
to generate required returns with the
conventional policy portfolios dominated
by stocks and bonds in the current low-
yield, high valuation environment. These
investors are increasing in sophistication
and have come to see alternatives as
critical “outcome-oriented” portfolio
building blocks (e.g., infrastructure for
long-dated income, private equity to ex-
tract illiquidity premiums). Growth will
accelerate as more of these investors
integrate alternatives within traditional
asset class allocations.
• Sovereign wealth funds are typically
on the receiving end of capital infusions
resulting from commodity and energy-
related national wealth as well as
steadily growing foreign exchange re-
serves. These investors—who are con-
centrated in Asia and the Middle East—
are fueling demand for high-convic-
tion/opportunistic strategies (e.g.,
hedge funds) and embracing alterna-
tives managers that offer not just alpha
but also opportunities for learning,
capability-building and co-investments.
A growing appreciation for the unique
“permanent” nature of the sovereign
capital base is also driving an in-
creased willingness to take on illiquid
assets (e.g., private equity, real estate
and infrastructure).
• Small pension funds and endow-
ments are increasingly entering the
market as “first-time buyers” as they
recognize the limitations of traditional
asset classes and seek out the en-
hanced performance and diversification
that alternatives potentially deliver (e.g.,
Segment’s
projected growth >10% 5-10% <5%
Net flows, 2013-17
~2.0 ~0.7 ~0.4 ~0.9 ~2.6
Pension funds Corporates1
SWFs
Endowments
& foundations
High-net-worth
individuals
Total
Small
Mid-sized
Large
~0.6
Insur-
ance
2013 alternatives AUM by segment, estimates
$ trillion, third-party managed assets only
Over the next
five years, a
“barbell” of large/
sophisticated
and small/newer
investors will
account for a
disproportionate
share of
alternatives flows
Exhibit 6
1
Includes corporate defined contribution plans as well as assets held on balance sheets of non-pension corporate entities.
Source: Prequin; SWF Institute; National Association of College and University Business Officers; The Foundation Center; McKinsey Global Asset Management Growth Cube
17. 15The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
unconstrained bond strategies as a re-
placement for core fixed-income hold-
ings). Smaller pension plans are
contemplating a shift to the “endow-
ment model” of more aggressive and di-
rect allocations to alternatives (versus
the historic emphasis on traditional
asset classes or allocations via funds of
funds). Many of these investors have
nascent alternatives programs, and their
low base of allocations in the segment
(typically 0 to 5 percent) leaves signifi-
cant room for growth.
• Retail and high-net-worth investors
are fueling a new wave of demand now
that they have access to a broad array
of alternatives strategies through the
proliferation of liquid retail funds. Cate-
gories where greatest demand is antici-
pated include absolute return,
multi-strategy and alternative credit
strategies. This growing interest in alter-
natives is compounded by a positive
overall flow dynamic—retail flows are
expected to be three to four times those
of institutional flows. Demand has been
strongest in the U.S. market (private
banks, family offices and registered in-
vestment advisors [RIAs]) as well as in
more global ultra-high-net-worth chan-
nels (e.g., private banks and multi-family
offices).
Divergent priorities across
institutional segments
Within the institutional investor universe,
growth in alternatives is now playing out
as “a tale of two cities,” with a divergent
set of investment priorities and prefer-
ences emerging across investor segments
(Exhibit 7).
Large (and sophisticated) institutions Smaller institutions
Access to broad range of quality
managers with sound risk management
practices
Co-investments and capability building as
a favored source of value add
Investment priorities
Outsourced services valued as a
supplement to internal capabilities (e.g.,
outsourced chief investment officer and
fund-of-funds models)
Targeted build-up of in-house investment
capabilities and openness to strategic
partnerships
Insourcing versus
outsourcing
Comingled and “retail” vehicles (mutual
funds and ETFs) under active
consideration
Separate accounts and customized
structures (e.g., “fund of one”) preferred
Investment vehicles
Large managers viewed positively given
product breadth and perception of
stability
Some degree of bias towards specialist
managers for unique abilities and
exposures
Manager preferences
There is a
distinct and
divergent set of
needs emerging
among large
and small
investor
segments
Exhibit 7
Source: McKinsey Global Wealth & Asset Management Practice
18. 16 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
McKinsey’s survey of institutional in-
vestors reveals that large, more sophisti-
cated investors (typically those with more
than $10 billion in AUM and possessing
dedicated in-house alternatives expert-
ise) intend to take more control over their
alternatives investing activities. A seg-
ment of institutions has been steadily in-
creasing direct investment activities in
targeted areas that favor the long-term
capital they can provide. These institu-
tions prioritize the sourcing of co-invest-
ments and often seek to consolidate
their existing relationships with invest-
ment managers into a smaller, but more
strategic, set that often includes an ele-
ment of capability building. These large,
sophisticated institutions are also raising
the bar on differentiation, frequently lean-
ing toward specialist boutiques (rather
than large, generalist asset managers) for
their ability to deliver unique capabilities
and customized exposures, often in the
form of separate accounts.
At the other end of the spectrum, smaller,
less established investors (typically those
with less than $2 billion in AUM, with
small teams of investment generalists) re-
port that their single-largest priority is to
secure access to quality investments and
managers. Alternatives add a level of
complexity to the investment and risk
management process, driving these insti-
tutions’ appetite for outsourced services
and solutions with embedded advice, in-
cluding multi-alternative products, funds
of funds, outsourced CIO solutions and
managed account platforms. In contrast
to their institutional counterparts, smaller
investors are drawn to large managers
because of their established brands, abil-
ity to deliver across a broad range of al-
Breadth of
investment offerings
Publicly listed firm
Part of a larger
organization (e.g., bank)
Large asset
manager
>$10 billion AUM
Percent
<$2 billion AUM
Percent
Positive Negative
-4
61 23-10
-5
61 -20 27
-7
58 -50 13
-5
48 -43 17
Investor preferences for alternatives managersSmall investors
strongly favor
large,
established
alternatives
managers with
broad offerings –
attributes that
are less
important to
large investors
Exhibit 8
Source: 2013/14 McKinsey Alternative Investment Survey
19. 17The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
ternatives asset classes and their robust
operational and compliance infrastruc-
tures (Exhibit 8).
McKinsey’s survey also reveals that
smaller institutions are twice as likely to
select risk management/mitigation as a
top-three criteria when it comes to select-
ing an alternative manager. This is due in
large part to their lower degree of familiar-
ity with alternatives and lack of large,
dedicated investment teams to support
due diligence and ongoing risk monitor-
ing. Larger institutions, by contrast, have
a greater focus on consistency of returns,
investment team and fees than smaller in-
stitutions (Exhibit 9).
Product preferences are diverging
for small and large institutions
Recognizing the diversity of investment
priorities and needs among client seg-
ments is an important first step for asset
managers seeking success in alternatives,
but it is hardly sufficient. Understanding
how those segments map onto product
demand is critical for deciding where to
play in the market. And as they continue
to increase their alternatives allocations,
smaller institutional investors and their
larger peers are exhibiting divergent prod-
uct preferences (Exhibit 10, page 18).
To be sure, hedge funds are experiencing
robust demand from virtually all investor
types, given their flexibility and liquidity in
delivering a broad range of alternatives
exposures. But this is where the similari-
ties end. Larger, more sophisticated in-
vestors are moving further down the
liquidity spectrum to embrace more spe-
cialized private market exposures (espe-
cially to real assets). Smaller, less
established investors, by contrast, are
Mid-sized institutions
($2 billion-$10 billion AUM)
Large institutions
(>$10 billion AUM)
Small institutions
(<$2 billion AUM)
Target market 24%
Investment team 29%
Consistency of returns 37%
Risk management 48%
Investment strategy 58%
Terms (e.g., fees) 25%
Investment team 41%
Risk management 41%
Consistency of returns 42%
Investment strategy 57%
Existing relationship 27%
Terms (e.g., fees) 47%
Investment team 50%
Consistency of returns 60%
Investment strategy 63%
Top five criteria for selecting alternatives managersSmall investors
view risk
management as
a top-three
requirement for
alternatives firms;
large investors
focus much
more on
investment team
Exhibit 9
Source: 2013/14 McKinsey Alternative Investments Survey
20. 18 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Expected change in allocations over the next three years
Increase
Maintain
Decrease
Corporate defined benefit
Public defined benefit1
Endowments & foundations
Taft-Hartley plans
Insurance general account & other
Type
Size2
Overall
$0.5 billion-$2 billion
$2 billion-$10 billion
>$10 billion
Hedge
funds
Private
equity
Real
estate
Infrastructure
Otherreal
assets
Total
(Currentalts
allocation)
Over the next
three years,
hedge fund
demand will be
strong across the
board, but large
investors will
venture much
further down the
liquidity
spectrum
Exhibit 10
1
Includes public defined benefit and public institutions (e.g., SWF).
2
Trends by size exclude corporate defined benefit.
Source: 2013/14 McKinsey Alternative Investments Survey
>$10B 45% 27%
$2B-
$10B
43% 36%
$0.5B-
$2B
33% 27%
33%33%
25%75%
38% 37%
63% 25%
31% 33%
46%27% 36%32%
35%29%
40%60%
Private equity Real estate Infrastructure Other real assets
Increase MaintainExpectations for alternatives allocations over the next three years
Percent of institutions by size
Two-thirds of
large investors
will increase
allocations to
private-market
assets over the
next three years,
but small
investors will be
far more
tentative1
Exhibit 11
1
Excluding corporate defined benefit plans.
Source: 2013/14 McKinsey Alternative Investments Survey
21. 19The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
seeking to fill alternatives allocations pri-
marily through hedge funds and other liq-
uid alternatives.
Among larger, more sophisticated in-
vestors, real assets—including real es-
tate infrastructure, agriculture, timber
and energy—are emerging as the next
frontier in private investing, as these in-
stitutions look beyond relative investment
performance toward more defined invest-
ment outcomes and seek to extract liq-
uidity premiums while gaining exposure
to hard-to-access forms of beta. Indeed,
more than two-thirds of large investors
plan to increase their allocations to real
estate, infrastructure and real assets over
the next three years (Exhibit 11). Large
endowments and insurers have been
early movers in real assets, citing bene-
fits such as diversification, inflation pro-
tection, enhanced returns and long-term
income streams.
Smaller institutions, too, have been ex-
pressing increased interest in real assets,
but have yet to make meaningful alloca-
tions beyond commodities and real estate
funds. One reason for this tentative ap-
proach is a lack of market depth and lim-
ited track records among managers in
more specialized categories. Real assets
also have unique and complex risk expo-
sures (e.g., commodity valuation, weather
risk, currency risk, political risk) which
many small investors are not currently
prepared to address.
Retail demand is fuelling growth in
liquid alternatives
At the far end of the barbell of alternatives
investors, the retail segment is reasserting
itself as the primary driver of growth. This
is particularly the case in the U.S., as re-
tail alternatives continue to move into the
mainstream, driven by a new wave of de-
mand from both high-net-worth individu-
als and mass-affluent investors. These
investors are increasingly looking to
hedge downside risk and seeking out so-
lutions such as principal protection,
volatility management and income genera-
tion in a low-rate environment. Access to
alternatives strategies is being democra-
tized through product and packaging in-
novations within regulated mutual funds
and ETFs. As a result, the broad category
of retail alternatives assets—which in-
cludes alternative-like strategies such as
commodities, long-short products and
market-neutral strategies in mutual fund,
closed-end fund and ETF formats—has
grown by 16 percent annually since 2005,
and now stands at almost $900 billion.
Hedge fund-like strategies offered through
’40 Act funds have experienced particu-
larly robust growth, as investors seek to
balance their desire for new alternatives
exposures with the need for liquidity.
Since 2005, mutual fund AUM in hedge
fund strategies have grown ten-fold, with
At the far end of the barbell of
alternatives investors, the retail
segment is reasserting itself as the
primary driver of growth.
22. 20 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
a sharp acceleration in the years follow-
ing the financial crisis (Exhibit 12). This
impressive momentum has been sus-
tained despite the significant run-up in
equity markets over the past two years.
Looking ahead, retail alternatives will be
the most significant driver of U.S. retail
asset management growth, accounting
for up to 40 to 50 percent of net new re-
tail revenues over the next five years.
McKinsey expects absolute return,
long/short and multi-alternative strate-
gies to grow disproportionately over the
next two to three years.
The growth of retail alternatives is being
driven by a set of structural trends similar
to those driving institutional demand. Retail
investors and their advisors are turning
away from the confines of traditional “style-
box” investing to embrace investment out-
comes. More retail assets are flowing to
RIAs, and McKinsey research has found
that nearly half of these advisors are al-
ready managing their client portfolios
against an absolute-return benchmark and
using alternatives and alternatives-like so-
lutions to help clients achieve their objec-
tives. Meanwhile, there is significant
headroom for retail alternatives expansion
in the largest intermediary channels (wire-
houses), as the typical 5 percent or below
alternatives allocation within current in-
vestor portfolios greatly lags the average
20 percent allocation that some home of-
fices are implementing in their asset alloca-
tion models.
New product development remains critical
to capturing growth opportunities and
Open-ended mutual fund AUM in hedge fund strategies, 2005-2014
$ billion
8
8
10
9
14
25
22
23
23
33
33
16
42
42
42
15
19
19
52
53
63
118
86
38
23
43
8
18
11
11
47
3
3
3
6
7
7
7
5144
5
10
6
633
308
177
152
9
9
9
123
2008200720062005 20132012201120102009
73
+43% p.a.
+22% p.a.
Other
Multi-strategy
Absolute return
Long/short
Credit
Retail hedge
fund strategies
have grown
tenfold since
2005, with a
sharp
acceleration
since the
financial crisis
Exhibit 12
Source: Strategic Insight; McKinsey analysis
23. 21The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
market share within the retail alternatives
market. Indeed, retail investors and advi-
sors are showing unprecedented open-
ness to new products, with more than 40
percent of new flows currently going into
unrated funds (that is, those without a
three-year track record) buoyed by a
combination of brand recognition and
strong institutional track records. As a re-
sult, a number of leading alternatives
funds have been able to gather assets
rapidly, as alternatives move into the
mainstream for this group of smaller, more
dispersed investors.
24. In stark contrast to the traditional world of asset
management, no true “category leaders” have yet emerged
in the alternatives market. The primary axis for competition
remains performance within a narrowly defined set of
product silos, and the market share of top firms remains
exceptionally low relative to other asset classes. Among
hedge funds and private equity asset classes globally, the
top five managers by assets collectively captured less than
10 percent market share in 2012—a far cry from the 50
percent share enjoyed by the top five firms in traditional
fixed income and large-cap equities and the 75 percent
share of top ETF firms (Exhibit 13). The top five real estate
managers captured only 16 percent market share.
Infrastructure and retail alternatives vehicles are somewhat
more concentrated, with the top five managers maintaining
a 25 to 35 percent market share.
A Rapidly Evolving
Competitive Landscape,
With Room for New
Leaders
22 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
25. 23
While alternatives, by their nature, lend
themselves to a more dispersed competi-
tive set, the degree of fragmentation in
the market suggests that a subset of
firms—be they traditional asset managers
or alternatives specialists—could capture
a disproportionate share of flows in multi-
ple products and multiple client seg-
ments. Firms seeking to thrive in this new
world of alternatives will require excel-
lence beyond investment performance,
with a high premium placed on innovation
in solution-based products (e.g., multi-al-
ternative funds), distribution (e.g., liquid
alternatives in defined contribution), mar-
keting (e.g., retail advisor education on al-
ternatives “use cases”) and thought
leadership (e.g., alternatives-oriented
model portfolios).
To be sure, the alternatives market will
continue to be highly competitive and
support a greater diversity of players than
the traditional asset management market,
given some of the natural constraints on
firm size (e.g, the capacity limitations of
certain alternative investment strategies)
and the common preference for specialist
boutiques. Nevertheless, leading hedge
funds, private equity firms and traditional
asset managers—which to date have oc-
cupied niches in the investment manage-
ment landscape—will increasingly pursue
an overlapping set of growth opportunities
in the fragmented alternatives market.
A “trillion-dollar convergence” is
well underway
The mainstreaming of alternatives, com-
bined with the highly fragmented nature of
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
$2.1T
Real
estate5
U.S. taxable
fixed
income2
Large-cap
domestic
equities3
U.S. retail
alts4
$0.6T
Infra-
structure
$0.2T$0.6T$1.9$1.9
ETFs
$1.8
Hedge
funds
Private
equity
Top five
managers
$2.6T
Rest
91%84%
73%68%
50%
40%
24%
92%
9%
16%
27%32%
50%
60%
76%
8%
Alternative AUM concentration by top 5 managers1
Total global assets (2013)
The alternatives
market remains
highly
fragmented, with
ample room for
new category
leaders to
emerge
Exhibit 13
1
Based on manager assets under management.
2
Includes short term, intermediate term, long-term, multi-sector, high yield, bank loan, and retirement income categories.
3
Includes large cap value, growth, and blend categories.
4
Alternatives investment strategies in ’40 Act funds; excluding REIT and precious metal funds.
5
Real estate funds in private equity style structures
Source: McKinsey Global Asset Management Growth Cube; Morningstar; Strategic Insight; Preqin; Institutional Investor
26. 24
the market, is driving a “trillion-dollar con-
vergence” of traditional and alternatives
asset management—a convergence that
McKinsey first identified in 20123
and that
is now rapidly accelerating (Exhibit 14).
Players on both ends of the spectrum are
competing on new battlegrounds to in-
crease their relevance to a broader set of
clients and their alternatives needs. Tradi-
tional asset managers have moved quickly
to stake their claim to the liquid alterna-
tives space. They have used their distribu-
tion reach to achieve a first-mover
advantage in the market for alternatives
mutual funds and ETFs. Indeed, 18 of the
20 largest retail alternatives funds in 2013
were run by traditional asset managers.
Traditional managers with experience
structuring undertakings for the collective
investment of transferable securities
(UCITs) funds have had an upper hand in
the European and Asian retail markets. A
number of these traditional firms have
built credible in-house alternatives bou-
tiques (e.g., hedge funds) and are seeking
to adapt their multi-asset capabilities to
innovate in solutions delivery in the core
institutional space.
Alternatives specialists are also moving
swiftly. A small number of publicly listed
mega firms have broken away from the
pack with an aggressive build-out of their
investment platforms to offer a broad and
comprehensive alternatives menu across
all asset classes, geographies and strate-
gies. No longer content with simply cap-
turing the top tier of institutional flows,
these firms have been making forays into
the retail space through innovations with
retail-friendly products (e.g., private equity
funds with low minimums or ’40 Act alter-
natives mutual funds), the launch of “tra-
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Product
vehicle
Liquidity
Private
equity
Hedge
funds
Traditional
asset management
Alternative
Liquid Illiquid
Registered
Unregistered
Expansion to illiquid investment strategies
(e.g., direct lending)
Acquisition of market driven/trading-related
investment capabilities
Diversificationofclientbasethrough
launchof40
Actfunds
Broadeningofalternativeclient
solutions(e.g.,fundoffunds)
Broadeningretailaccesstofunds
Productinnovationtotapilliquidity
(e.g.,masterlimitedpartnerships)
The convergence
of traditional and
alternative asset
management is
well underway
Exhibit 14
Source: McKinsey Global Wealth & Asset Management Practice
3
The Mainstreaming of
Alternatives: Fueling the Next
Wave of Growth in Asset
Management, McKinsey &
Company, 2012.
27. 25
ditional” asset management subsidiaries,
and the development of retail distribution
forces. Hedge funds are expanding to
illiquid investment strategies, such as di-
rect lending and distressed investing, and
increasingly moving into retail products.
And private equity firms are acquiring
market-driven, trading-related investment
capabilities. These firms have also been
rapidly expanding their global footprints,
with a particular focus on building an
emerging markets presence.
In this era of convergence, competition
between traditional managers and alter-
natives specialists will only intensify. As
alternative investments continue to make
their way into retail distribution channels
through vehicles such as liquid-alterna-
tives funds, asset managers are likely to
increase the pace of acquisitions and lift-
outs to add that capability. Likewise, in
the institutional space, managers are ac-
quiring capabilities in asset classes like
real estate, credit and hedge funds. A
wave of partnerships or joint ventures be-
tween traditional and alternatives firms
(including funds of funds) is also possible,
as smaller managers lacking scale and
distribution heft seek to establish rele-
vance in alternatives.
Successful business models in an
era of convergence
The rapid convergence in the competitive
focus of traditional asset managers and
alternatives specialists is leading to the
emergence of a new alternatives ecosys-
tem. As this ecosystem takes shape,
which firms will lead the way? McKinsey
research suggests that four successful
business models are emerging, each with
a distinct value proposition tailored to a
targeted set of clients (Exhibit 15).
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Breadth of
investment
capabilities
Centralization of platform
Low High
Narrow
Wide
Multi-alternatives mega firm
(2013 AUM: ~$1.1 trillion)
Full range of strategies across spectrum of
liquidity
Advantaged investment origination from scale
and reach of global platform
Steady pipeline of junior talent attracted to brand
and stability of platform
Diversified asset manager
(2013 AUM: ~$1.8 trillion)
Full range of strategies, including integrative
multi-asset solutions
Robust, centralized risk management
infrastructure
Scale in client service delivery (e.g., thought
leadership, advisory services)
Specialist platform
(2013 AUM: ~$1.4 trillion)
Focus on single asset class and/or geographic
region
Clear investment philosophy scaled across
institutionalized investment platform
Disciplined approach to growth (e.g., capacity
constraints)
Single-strategy boutique
(2013 AUM: ~$2.9 trillion)
Laser-like focus on a high-conviction investment
strategy in single asset class
High degree of differentiation relative to peers
Clear alignment of interests via founder-owner
economics
Four successful
business
models are
emerging within
the alternatives
industry, each
with a unique
value
proposition
Exhibit 15
Source: McKinsey Global Wealth & Asset Management Practice
28. 26
• Single-strategy boutiques are the
nimble and highly-focused firms that
have thus far been the mainstay of the
alternatives industry. They will continue
to be a channel for innovation and talent
incubation and a source of high-convic-
tion strategies for investors seeking a
performance edge.
■ Specialist alternatives platforms
possess a unique investment philosophy
and a sharp focus on delivering invest-
ment excellence in a single asset class
or strategy through an institutionalized
platform. Leading firms in this group
typically take a highly disciplined ap-
proach to growth that is sensitive to ca-
pacity constraints and brand dilution.
■ Multi-alternative mega firms offer a
breadth of “industrial strength” alterna-
tive investment capabilities across a
range of strategies, asset classes and
geographies. These firms leverage their
strong brands, synergies across invest-
ment engines (e.g., risk management
and investment origination) and an in-
creasing ability to offer a set of tailored
alternatives solutions.
■ Diversified asset managers offer a
“one-stop shop” for a full set of client in-
vestment needs. Unique strengths of
firms pursuing this model include the
ability to integrate alternative invest-
ments into a set of broader investment
solutions and services (often in concert
with traditional asset classes) and at-
scale distribution capabilities that can
reach a broad range of client segments.
As the industry matures, more
scalable business models are
capturing share
As the alternatives industry matures, it is
also evolving in the direction of greater in-
stitutionalization. In the process, the more
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
+1
+5
-2
-4
~$5.0T ~$7.2T
Mega alts firm
Specialist platforms
Single-strategy boutique
100% =
Diversified asset manager
2008 2013
45
41
20
19
10
15
24 25
Share of alternative AUM by business model type1
Percent2
Change, 2008-13
Percentage points
Specialist
boutiques are
losing share to
more scalable
business models,
as the
alternatives
industry matures
and
“institutionalizes”
Exhibit 16
1
Excludes retail alternatives and funds of funds.
2
Percentages may not total 100 due to rounding.
Source: Institutional Investor; Towers Watson; company websites; McKinsey analysis
29. 27
scalable business models—diversified
asset managers and multi-alternative
mega firms—are capturing market share
from single-strategy boutiques (Exhibit
16). Specialist alternatives platforms will
continue to play an important role in the
industry, but will be more constrained in
their growth by their narrower focus on
single asset classes.
Firms in all four of these models will need
to focus their management agendas on a
number of themes to capitalize on their
strengths and capture share in the alter-
natives market:
■ For diversified asset managers, the
main imperative will be to extend their
advantage in product development and
solutions innovation and to stake out a
claim to segments where scale pro-
vides an advantage. The core challenge
they face is to create a convincing
value proposition to attract and retain
top alternative investment talent, while
adapting their operating models to ac-
commodate alternatives teams with a
highly independent bent.
■ For multi-alternatives mega firms, the
key to success lies in developing a ro-
bust governance model that weaves to-
gether a significantly expanded array of
investment teams across multiple asset
classes into a coherent firm that is more
than the sum of its parts. The core chal-
lenge that these firms (the majority of
which have recently gone public) will
need to manage is to balance the de-
mands of their shareholders, who value
growth and diversification, with those of
their investors, who value investment
focus and performance.
■ For specialist platforms, ongoing disci-
pline in business expansion (e.g., new
geographical markets) and the man-
agement of capacity constraints will be
the key to maintaining investor loyalty.
The core challenge that this group will
seek to mitigate is in talent attraction
and retention against both the larger
and more diversified firms who have
deeper pockets (and in many cases,
public currency) as well as the smaller
boutiques, which offer a more entrepre-
neurial economic environment.
■ For single-strategy boutiques, alpha
generation on a consistent basis will
continue to be the primary driver of
success. However, the institutionaliza-
tion of investment platforms and
processes and the professionalization
of risk management functions will be in-
creasingly important as boutiques seek
to access larger pools of capital, as will
talent retention and succession as indi-
vidual firms mature. These firms will
also need to find creative solutions
(e.g., partnerships) to address opportu-
nities in retail, given the distribution
scale required in that segment.
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
30. Thriving in the
Converging Alternatives
Market:
Six Imperatives for
Management
28 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Asset managers with a meaningful alternatives franchise—
and those seeking to build one—will need to make
deliberate choices about where to play and how to
position themselves in a rapidly evolving competitive
landscape. Six sets of actions are critical to defining and
executing a successful strategy in alternatives (Exhibit 17).
31. 29The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
1. Be clear about aspirations in alterna-
tives and how they fit into the broader
growth strategy. For instance, is the goal
to be a top-three player in a narrowly fo-
cused set of asset classes or is it simply
to have an at-par offering across a di-
verse range of alternatives strategies to
be responsive to client demands? What
are the firm’s relative—and realistic—as-
pirations in investment performance,
growth in assets under management, and
mind-share with sophisticated investors?
What is the right balance to strike
among these objectives? What metrics
should be used to judge success?
2. Pick target client segments at a
granular level and ensure that product
and distribution teams have deep in-
sight into the underlying needs and in-
vestment challenges that clients are
seeking to solve with alternatives. This
choice of where to play is not simply a
matter of deciding between the broad
categories of institutional and retail; it is
about making a commitment to serve a
specific set of needs for a targeted set
of sub-client segments (e.g., alternative
credit exposures for sovereign wealth
funds). The result is a focused set of pri-
orities and resource allocations for a lim-
ited number of products, client
segments and geographies.
3. Develop a nuanced understanding
of the business economics of alter-
natives to enable disciplined trade-offs
for different fee models (relative certainty
of management versus performance
fees), scale characteristics of product
vehicles (high margins of hedge funds
versus operating leverage of mutual
funds), and flow characteristics of client
segments (e.g., “stickiness” of retire-
ment assets versus “hot money” in core
retail), as well as to create the right met-
rics for guiding performance manage-
ment for the alternatives franchise.
4. Build a smart distribution model that
combines specialized alternatives
know-how (e.g., via product specialists
Define alternatives aspirations and where
they sit in the larger growth strategy
Pick spots at a granular level, creating
priorities around a focused set of products,
client segments and geographies
Client
segmentation
and insights
Drivers of
alternative
economics
Governance
and operating
model
Outcome-oriented
product strategy
“Smart”
distribution
Aspirations
Design an operating model that reinforces
the alternatives value proposition
2 3
1
654
Six building
blocks of a
successful
alternatives
strategy
Exhibit 17
Source: McKinsey Global Wealth & Asset Management Practice
32. 30 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
that support a generalist sales force) and
operating leverage (e.g., potentially via
partnerships) and that makes targeted in-
vestments in client marketing/education
that link specific alternatives capabilities
to investment “use cases.” Successful al-
ternatives managers will invest in building
the ability to deliver advice on the entire
client portfolio—a capability that will grow
in importance with the proliferation of al-
ternatives products. The complexity of
the sales challenge will be amplified as
managers face both the greater sophisti-
cation of larger investors and the prolifer-
ation of smaller alternatives buyers.
Distribution and client service will increas-
ingly be critical for alternatives franchises
seeking growth.
5. Define an outcome-oriented product
strategy that clearly aligns investment
capabilities and strategies across the en-
terprise toward priority client investment
outcomes. For example, how does the
current product set and near-term pipeline
map against the core investor priorities of
growth, volatility management, inflation
protection, income generation and inter-
est-rate risk mitigation? What role do al-
ternatives play in the delivery of a broader
set of multi-asset investment solutions?
6. Create a robust governance and oper-
ating model that balances the independ-
ence of alternatives investment teams
with the opportunities to build synergies
across investment and distribution plat-
forms. This effort should include designing
the right mechanisms for coordination
across investment engines, defining ap-
propriate levels of centralization for key
product and distribution capabilities (e.g.,
whether to build an integrated alternatives
business versus a federation of bou-
tiques), and developing a set of processes
to attract and retain alternatives talent and
incentivize it appropriately.
■ ■ ■
The alternatives market will unquestionably
represent one of the most attractive
growth opportunities for investment man-
agement firms in the coming five years.
Firms of all stripes—whether they are tradi-
tional asset managers that are dabbling in
alternatives or specialized alternatives bou-
tiques seeking to grow beyond the narrow
cores—must commit and invest in a strat-
egy that defines where to play and how to
capture share in the rapidly converging
world of traditional and alternative asset
management.
Pooneh Baghai
Onur Erzan
Céline Dufétel
Ju-Hon Kwek
The authors would like to acknowledge the contributions of Kevin Cho, Sacha Ghai, Aly Jeddy,
Owen Jones, Bryce Klempner, Carrie McCabe, Gary Pinkus and Nancy Szmolyan to this report.
33. 31
APPENDIX
Defining Alternative Investments
Definitions of alternative investments vary considerably because of the relative youth of
the category and the dynamic nature of the industry. For the purposes of this paper,
alternative investments are defined as a class of investments that offer return streams
with a fundamentally different set of correlations and/or risk-return profiles than tradi-
tional asset classes such as stocks, bonds and cash.
At the core of alternatives sit three broad categories of investments. These are
sometimes referred to as “institutional quality” alternatives, because they are typical
of what would be held by sophisticated institutional investors, such as pension funds
or endowments.
■ Hedge Funds: A wide-ranging set of private investment vehicles that invest in the
public markets, typically employing strategies that involve leverage and the use of de-
rivatives. Key hedge fund categories include equity long-short, relative value, event
driven, global macro and multi-strategy
■ Private equity: A set of closed-end investment vehicles with fixed lock-up periods
that invest in both equity and debt that are not publicly-traded. Key categories are
leveraged buy-outs, growth equity, venture capital, mezzanine financing and dis-
tressed investing.
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
The alternative investments universe
Retail alternatives (~$2 trillion)
Vechicles providing non-accredited investors with exposure to the above stragegies via registered vehicles:
mutual funds, closed end funds and ETFs
Fund of funds (~$0.9 trillion)
Hedge funds
(~$2.6 trillion global AUM)
• Long/short equity
• Relative value
• Event-driven
• Global macro
• Multi-strategy
Private equity
(~$2.1 trillion)
• Leveraged buyouts
• Growth investing
• Venture capital
• Mezzanine capital
• Distressed
Real assets
(~$2.4 trillion)
• Real estate
• Infrastructure
• Agricuture
• Energy
• Commodities
Defining
alternative
investments
Exhibit A
Source: McKinsey Global Wealth & Asset Management Practice
34. 32
■ Real assets: A category of investments that focuses on ownership of non-financial
assets through a variety of closed- and open-ended fund vehicles. Key categories in-
clude real estate, infrastructure, agriculture, timberland and energy. Commodities –
which are sometimes classified as a distinct asset class – are included in this cate-
gory as well.
Beyond these individual asset classes, there is an additional layer of “funds of funds” –
investment vehicles that provide broad exposure to a wide range of alternatives invest-
ment managers and strategies. The bulk of these vehicles are focused on hedge
funds, although there are meaningful fund of fund assets in private equity (and to a
lesser extent real assets). Multi-asset fund of funds that deliver broad-based exposure
across alternative asset classes are a small but emerging category.
The final category is “retail alternatives.” This refers to a broad array of strategies that
are designed to deliver alternatives exposure via registered retail vehicles, including
mutual funds, closed-end funds and exchange-traded funds. These registered retail
vehicles create restrictions on the underlying investment strategies that can be em-
ployed (e.g., liquidity requirements and restrictions on the use of derivatives and lever-
age), but provide managers with access to a broad base of retail investors.
The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
35. 33The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
About McKinsey & Company
McKinsey & Company is a management consulting firm that helps many of
the world’s leading corporations and organizations address their strategic
challenges, from reorganizing for long-term growth to improving business per-
formance and maximizing profitability. For more than 80 years, the firm’s pri-
mary objective has been to serve as an organization’s most trusted external
advisor on critical issues facing senior management. With consultants in more
than 50 countries around the globe, McKinsey advises clients on strategic,
operational, organizational and technological issues.
McKinsey’s Global Wealth & Asset Management Practice serves asset man-
agers, wealth management companies and retirement firms globally on issues
of strategy, organization, operations and business performance. Our partners
and consultants have deep expertise in all facets of asset management. Our
proprietary research spans all institutional and retail segments, asset classes
(e.g., alternatives) and products (e.g., ETFs, outcome-oriented funds). Our
proprietary solutions provide deep insights into the flows, assets and eco-
nomics of each of the sub-segments of these markets and into the prefer-
ences and behaviors of consumers, investors and intermediaries.
To learn more about McKinsey & Company’s specialized expertise and capa-
bilities related to the asset management industry, or for additional information
about this report, please contact:
Pooneh Baghai
Director, New York & Toronto
pooneh_baghai@mckinsey.com
Onur Erzan
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Philipp Koch
Director, Munich
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Alok Kshirsagar
Director, Mumbai
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Joe Ngai
Director, Hong Kong
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Frédéric Vandenberghe
Director, Brussels
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Gemma D’Auria
Principal, Dubai
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Céline Dufétel
Principal, New York
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36. 34 The Trillion-Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments
Further insights
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Strong Performance, But Health Still Fragile: Global Asset Management in 2013
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The Asset Management Industry: Outcomes Are the New Alpha
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The Mainstreaming of Alternative Investments: Fueling the Next Wave of Growth in
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July 2012
The Hunt for Elusive Growth: Asset Management in 2012
June 2012
Growth in a Time of Uncertainty: The Asset Management Industry in 2015
November 2011
The Second Act Begins for ETFs: A Disruptive Investment Vehicle Vies for Center
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