Pension Managers Still In Love With Alternative Investments

CNBC just beat me to the punch (I hate when that happens) on a post I was preparing to make on alternative investments. Citigroup put out some interesting notes from its recent survey of pension managers, who collectively manage over $1 trillion in assets.

Here are some of the findings it contained:

• About 85% of pension managers will raise their allocation to alternative investments over the next 3 years
• Within 3 years, private equity allocations will surpass both hedge fund and real estate allocations
• Almost 90% of pension fund managers allocate to private equity vs. only 50% allocating to hedge funds
• But hedge funds get more money, larger allocations
• The majority of pension managers find the "2 & 20" fee structure unsustainable

I found most of the observations surprising, in that I would not have expected that many managers to say they will increase their allocations to alternatives over the next 3 years. I would have thought the peak had passed, and these allocations would decrease.

Go figure.