GLOBAL - Sovereign wealth funds (SWFs) are expected to lead the move into new alternatives in the next decade, but are in no rush to do so say industry professionals.
This was expected to impact negatively on the US dollar as SWFs moved away from asset classes pinned the currency in favour of the broader investment universe, such as emerging market debt or, in the case of Middle Eastern funds, home markets.
Nugée said: "In ten years' time, we are going to see SWFs investing in things we have not even thought about yet."
Nugée added that the age and size of the funds, along with the experience of people running them, played a big part in how they invested: "Once they have become more established and grown used to traditional assets, they will move into the alternative space. They will move at a much quicker pace than anything we have seen so far."
However, Divyesh Hindocha, global director of consulting, Mercer, said while he broadly agreed those funds already present would push further into the alternative space, he was surprised those not yet there seemed reluctant to establish a presence.
Hindocha added: "Funds in a start up phase have stuck mainly to defensive assets but I am not sure many of them will even look to alternatives, whereas older, more established funds have been there for years and will continue to follow that path."
He said capacity issues could be making it difficult for some.
"It could be down to a lack of good ideas in the alternative space and the availability of investment opportunities away from the mainstream that could cope with inflows from this size of fund," Hindocha added.
Erik van Dyke, CIO and CEO, Compendeon, said there was no urgency for SWFs to allocate capital to alternatives: "These funds have very long term goals, but also have liquidity, something which is lacking from most of the western financial world at the moment. They can afford to wait for the right deal."
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