100 largest alternative asset managers grow collective assets beyond $4 trillion

24 July 2017 Consultancy.uk

The global management of money has seen the 100 largest companies in the alternative asset segment see their assets under management increase by around 10% to more than $4 trillion. Pensions remain the biggest slice of alternative AuM for the top players at more than $1.4 trillion of total global assets.

The world’s 100 largest asset managers, presided over around $4 trillion in alternative assets across their various asset class portfolios. Real estate strategies was the largest segment by far, at more than $1.4 trillion, followed by direct private equity funds, valued at $695 billion. Direct hedge funds ranked close behind, at around $674 billion.

According to Willis Towers Watson’s ‘Global Alternatives Survey 2017’, a paper completed in partnership with the Financial Times, in total, funds were up 10% on last year’s result, although losses were noted among the top 25 wealth manager assets, at 5%. The market for the segment has become tougher as fees becoming increasingly transparent.

The largest holdings, on average, were in direct infrastructure funds, at around $53 billion, followed by real estate strategies at $47 billion on average across 30 companies. In terms of the second largest segment for total assets under management, direct private equity funds were number one, at almost $700 billion across 16 companies involved.

Global AuM for top 100 firms

Looking at the total investment in alternative assets, pensions funds rule at 33%, followed by ‘other’ investors, at around 28% of the total. Banks have a share of around 15%, followed by insurance companies. In absolute terms, Pension funds are by far the largest type of asset under management at the top 100 firms, representing around $1.3 trillion across 75 of the firms in the top 100. Banking sector assets come second, at around $600 billion across 66 institutions, while insurance company assets account for around $500 billion in assets across 69 managers.

Top 10

Global investment giant Bridgewater Associates is the market leader in terms of largest asset pool under management, with more than $116 billion in the direct hedge funds asset class. TH Real Estate takes the second spot, with a $105 billion position in real estate strategies. Global investment giant Blackstone, which employs over 2,190 people worldwide, takes third and forth sport respectively, with $101 billion in real estate strategies and more than $100 billion in direct private equity funds. The real estate investor recently hired property consulting firm CBRE to advise on the divestment process of property in the Netherlands, as the asset managers attempted to cash in on high real estate prices in the country.

Top 25 ranked by total AuM in asset class

Macquarie Group meanwhile ranks just behind, with $96 billion under its management in the direct infastructure funds segment. PGIM, Prudent Private Placement Investors and CBRE Global Investors come in sixth, seventh and eighth respectively, ranging from $94 billion in AuM to $78 billion. UBS Asset Management and TGP Capital round of the top 10.

Aside from Blackstone, with three enteries in the top 10, taking the number 11 spot with $71 billion in fund of hedge funds, no other firms find themselves in the top 25 twice – although in the top 100, a number of double entries are noted – including UBS and AXA.

The research found that the largest share of the top 100 AuM is held in US asset, at 54% of the total, followed by Europe, at 33% of the total. The Asia Pacific region represented a small portion of total assets, at 8%. Different asset classes had relatively different levels of investment between regions however.

Distribution by region and asset class

Hedge funds, for instance, were largely situated in North America, at 60%, followed by Europe and Asia at 15% each. Direct commodities funds were even more skewed towards North America, at 74% of total funding for the segment. Europe was the largest destination for real estate strategies and direct infrastructure funds, both at 38% of the respective asset type totals. Direct hedge funds were found to have the highest prevalence in ‘other’ global regions, at 25% of total funding for the segment.

There were minor differences between 2015 and 2016 under the 96 fund managers that took part in both surveys. In the Direct hedge fund asset class, the number of managers stayed the same as the previous year, at 17. In the private equity funds of funds segment, a small shift, of 1%, was noted, with AuM increasing to 13%. In the direct private equity finds segment, an asset increase of 9% was noted, although the proportion remained the same at 18% of the total.

Comparison 2015 – 2016

Global Head of Manager Research at Willis Towers Watson, Luba Nikulina, commented, “As capital supply and competition have increased in some segments of the illiquid credit universe, such as direct lending for example, yields are not always offering sufficient compensation for illiquidity and risk. At the same time, we have seen some withdrawal of capital from hedge funds in the face of high fees, skewed alignment of interests and performance headwinds. It appears that the growing groundswell of negative sentiment that has arisen due to the aforementioned issues is now showing up in the decisions of asset allocators.”


8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.