UK - Institutional investors in the UK are now allocating nearly a third of their portfolios (28%) to alternative assets, up from 21% three years earlier, according to a survey by JP Morgan Asset Management (JPMAM).

JPMAM said the trend was likely to continue, with most respondents to the survey expecting to increase their alternatives allocations - at the expense of equities - to 31% over the next two to three years.

Hedge funds accounted for the lion's share of alternative weightings, with an average allocation of 8.2%, up from 6.1% in 2007. Respondents said they aimed to boost this to an average of 9.2% over the next few years.
The survey also found that the percentage of UK pension schemes with exposure to hedge funds had grown significantly, with 45% currently investing or looking to invest in hedge funds, up from 23% in 2007.

More than a quarter of these investors made their first hedge fund investment less than three years ago, JPMAM said.

While real estate currently enjoys the largest market penetration - with more than half (56%) of all respondents investing or planning to invest in the asset class - this has fallen from 71% in 2007.

JPMAM said the sharp reduction could be attributed to "disappointment in returns", with nearly one-third of investors saying returns over the last 12 months had been less than expected.

The survey found investors were "broadly positive" about the outlook for all major alternative asset classes over the next year.

Hedge funds were deemed the most attractive for the longer term, along with private equity and real estate over the next two to three years.

Peter Ball, head of UK institutional business at JPMAM, said the survey showed alternatives were set to see further strong growth in pension schemes.

"While this does not necessarily come as a surprise, it does demonstrate how different allocations to alternatives are now compared with three years ago," he said.

"It is clear investors are becoming more comfortable investing in alternatives as their understanding of such asset classes grows and, given the turbulent market conditions over recent years, they appreciate the increased level of diversification offered by alternatives."