Australian alternative assets – classified as non-traditional assets including hedge funds, private capital and commodities – continue to hold strong positions globally.
The private capital portion of the industry, totalling $81 billion, ranks Australia seventh globally, ahead of Japan, Singapore and Germany, while in terms of hedge funds, Australia only trails the US, UK and Jersey.
Industry data provider Preqin CEO Mark O’Hare says the strength of the industry is a reflection of the opportunities available in Australia.
“With total industry assets under management having reached $180 billion, and with a total of 391 alternatives fund management firms and 253 significant institutional investors based in Australia, the country is truly one of the leaders of the industry globally,” he said.
“Private equity returns in Australia over the long term have been superior to those elsewhere, and meanwhile, 2015 was a great year for the local hedge fund industry, delivering returns well in excess of the global benchmarks.”
According to Preqin, one of the top Australian hedge fund performers was Tribeca Global Natural Resources Funds.
Co-portfolio manager Craig Evans said that part of the success of hedge funds this year has stemmed from the natural resource sector.
“The majority of our returns in 2016 have come from the precious metals, energy, soft commodities and specialty sectors, with the largest geographic contributors being North America and Australia,” he said.
The hedge fund sector has experienced some volatility in recent years, suffering in the aftermath of the GFC and the consequent drop in investor confidence.
However, since then the Australian industry has been boosted in part due to superannuation inflows, making up more than half of all investment in hedge funds in the country according to Preqin.
Despite its revitalisation however, the sector continues to remain largely inaccessible to everyday investors, Mr Evans said.
“Due to the inherent complexity in hedge fund strategies, the investor base in Australia has been skewed towards sophisticated institutional investors, which is still the case.”