Pensions Invest More Than $62B In PE, Survey Says –

A survey of pension funds around the world shows that pensions invested more than $62 billion in alternative assets last year. The survey, conducted by Reigate, England-based consulting firm Watson Wyatt Investment Consulting and released last week, found that pensions invested $17 billion in private equity in 2004.

Private equity, real estate and hedge funds together grew by $161 billion last year and bring the total capital managed in alternative assets to approximately $1 trillion. The survey found that real estate is the most popular alternative asset class for pension funds in Europe and North America with private equity and hedge funds coming in second and third place, respectively. Asian pensions reported the opposite with hedge funds being the most popular alternative asset class.

Private equity managers increased their assets by 14% last year and now manage approximately $193 billion. Private equity accounted for 17% of new alternative investment capital from North America, according to the survey. The survey also found that private equity makes up a total of 38% of all alternative assets managed.

Roger Urwin, Watson Wyatt’s global head of investment consulting, said in a statement that pension funds the world over have heard the message of diversification and that private equity has benefited from that. “Private equity is slowly gaining acceptance among pension funds globally as a logical addition to their portfolios,” he says. He did issue a caveat that the cost of managing a private equity portfolio is still very large.

According to the survey, Hamilton Lane Advisors manages the largest amount of advisory assets in private equity with approximately $39 billion and Pacific Corporate Group manages the most in private equity fund-of-fund assets, with $22 billion.

The survey gathered data from 125 fund managers up to December 2004.