Alternative Investments on the Rise Since 2005While more investors and financial advisors search for investment options outside of traditional stocks and bonds, alternative investments have been on the rise since 2005.
Alternative investments vary and take the form of hedge funds, private equity, real estate, commodities, managed futures, commodities, venture capital, and financial derivatives. Recent reports and studies from McKinsey & Company, Preqin, and Deloitte indicate that the appetite for alternatives is on the rise and will continue through 2015.
Taking a look back at alternative and traditional investments, here are the three main takeaways.
1. The global AUM of alternative investments has risen by 119% over the last 8 years from 2005 to 2013. In 2013 the total global AUM of alternative asset classes was $8.1 trillion versus $3.7 trillion in 2005. Taking a closer look, the largest growth in alternatives was in hedge funds and real assets. From 2005 to 2013, real assets had a compound annual growth rate (CAGR) of 11.6% while hedge funds had a CAGR of 11.4%.
2. The CAGR for alternative investments was nearly double that of traditional investments in the public market from 2005 to 2013. Given that the alternative investment market has been rising, how does this compare to traditional investments? As the infographic shows, alternative investments had a CAGR of 10.7% versus traditional investments’ CAGR of 5.4% from 2005 to 2013. It’s interesting to note that during the financial crisis, the global AUM of traditional investments significantly decreased by 18% while the global AUM of alternative investments did not experience a dip and remained stagnant.Source: FINalternatives