Traditional asset management groups are racing to expand offerings in alternative investments, including real estate, as they seek to boost profitability and head off competition from private equity giants.
More than a dozen groups known for their mutual and exchange traded funds each reported managing at least $100bn in alternative assets at the end of last year, up from just nine groups five years ago. Their ranks include BlackRock, Invesco and PGIM.
The rapid bulk-up has led to fierce competition for talent and alternative specialist firms. AllianceBernstein last week announced plans to build its alternative assets to nearly $50bn with the purchase of CarVal Investors, and Franklin Templeton expects to top $200bn after it completes its acquisition of Lexington Partners in April.
At BlackRock, where invested alternatives under management have more than doubled in five years to $265bn, chief executive Larry Fink told shareholders this week plans to “accelerate growth… in private markets” were central to the group’s strategy.
“Asset managers are going after this space [because] their investors are asking for it,” said Ju-Hon Kwek, head of asset management consulting at McKinsey. “Investors are fighting for allocations to high-quality private market strategies. Everyone wants more.”
The funds are concentrating on private lending, real estate, infrastructure and stakes in private companies, all areas where institutional clients have been increasing allocations in recent years. A recent Prequin survey found 86% of limited partners intended to invest the same or more money in private capital this year.
Globally, alternative assets topped $15tn and 15% of total assets under management last year. But 2025 that is expected to rise to $22tn and 16%, according to a Boston Consulting Group report.
Its figures show that while alternatives represent a small portion of AUM, they account for more than 40% of revenue.
