Key Takeaways
- • 60% of infrastructure managers expect assets under management to grow by at least 50% over the next five years, with real estate (44%) and private equity (39%) managers showing similarly strong confidence in growth trajectories through 2020.
- • Demographic and macro-economic shifts are creating unprecedented demand for real assets—including transport facilities, communications networks, housing, and hospitals—that far exceeds government and public sector capacity to fund, creating significant opportunities for private capital deployment.
- • Retail investor participation in real assets is expected to accelerate materially by 2020, with almost half of surveyed private equity and real estate managers anticipating higher capital inflows from mass affluent and high net worth individuals in developing markets, alongside expanded sovereign wealth funds and defined contribution schemes.
- • BNY Mellon and Preqin survey of 340 global alternative investment managers reveals that institutional investors (pension funds and family offices) currently dominate real asset allocations, but diversification of capital sources is expected to broaden significantly over the forecast period.
Summary
A comprehensive survey of 340 private equity, real estate, and infrastructure fund managers globally indicates robust anticipated growth in real assets through 2020, driven by structural demographic and macro-economic forces that extend beyond traditional public sector financing capacity. According to research conducted by BNY Mellon in collaboration with Preqin, titled "Building for the future: How alternative investment managers are rising the demographic challenge," the alternative investment management sector is positioning for material asset expansion across multiple categories.
Infrastructure asset managers lead growth expectations, with 60% forecasting assets under management increases of at least 50% within five years. Real estate and private equity managers express similar confidence, with 44% and 39% respectively anticipating comparable growth rates. These projections reflect underlying structural demand for capital investment in essential infrastructure and real assets—including transport networks, telecommunications infrastructure, residential and commercial property, and healthcare facilities—that government budgets and traditional public financing mechanisms cannot adequately address.
Alan Flanagan, global head of Private Equity and Real Estate Fund Services at BNY Mellon, characterized these shifts as "deep-rooted demographic and macro forces" creating "unprecedented need for investment in real assets." He noted that private capital's role in funding essential services now extends into historically government-dominated sectors, fundamentally reshaping capital allocation patterns.
The investor composition underpinning these real asset flows is expected to shift notably by 2020. While institutional investors—particularly pension funds and family offices—currently represent the largest capital base for real asset investments, nearly half of surveyed private equity and real estate managers anticipate that retail investors will account for a materially higher proportion of capital inflows by 2020 than at present. This anticipated shift reflects multiple concurrent trends: capital accumulation among mass affluent and high net worth individuals in developing markets, continued sovereign wealth fund expansion, and increasing prevalence of defined contribution pension schemes that allocate capital across alternative asset classes.
Infrastructure asset managers lead growth expectations, with 60% forecasting assets under management increases of at least 50% within five years. Real estate and private equity managers express similar confidence, with 44% and 39% respectively anticipating comparable growth rates. These projections reflect underlying structural demand for capital investment in essential infrastructure and real assets—including transport networks, telecommunications infrastructure, residential and commercial property, and healthcare facilities—that government budgets and traditional public financing mechanisms cannot adequately address.
Alan Flanagan, global head of Private Equity and Real Estate Fund Services at BNY Mellon, characterized these shifts as "deep-rooted demographic and macro forces" creating "unprecedented need for investment in real assets." He noted that private capital's role in funding essential services now extends into historically government-dominated sectors, fundamentally reshaping capital allocation patterns.
The investor composition underpinning these real asset flows is expected to shift notably by 2020. While institutional investors—particularly pension funds and family offices—currently represent the largest capital base for real asset investments, nearly half of surveyed private equity and real estate managers anticipate that retail investors will account for a materially higher proportion of capital inflows by 2020 than at present. This anticipated shift reflects multiple concurrent trends: capital accumulation among mass affluent and high net worth individuals in developing markets, continued sovereign wealth fund expansion, and increasing prevalence of defined contribution pension schemes that allocate capital across alternative asset classes.
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