Delegated Investment Management in Alternative Assets

Aleksandar Andonov

No 18352, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Institutional investors segment into investors that hold simple portfolios of traditional equities and bonds, and investors that manage complex strategies in public and private markets. Investors implementing active portfolio management and holding diversified portfolios of equities and bonds are more likely to invest in alternative asset classes. The performance of institutional investors in alternative assets is significantly lower than in equities, suggesting that investors accept lower returns in exchange for diversification benefits. Institutions delegate 90% of their alternative investments to external managers and funds-of-funds. These intermediaries capture a large part of the potential diversification benefits through higher fees and lower returns.

Keywords: Institutional investors; Alternative assets; Private equity; Real estate; Hedge funds; Infrastructure; Delegation; Intermediation (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2023-08
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