Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Another big manager climbs aboard the alts express
PGIM has consolidated its alternatives units and appointed current real estate boss Eric Adler to head it up as it looks to shop a range of capabilities – including private credit, real estate equity and debt, and agriculture – to a yield-hungry institutional client base.
“Together the formation of PGIM Private Alternatives and Eric’s appointment reflect our firm belief in the importance of offering our clients seamless access to the full suite of capabilities across PGIM’s affiliates, particularly as institutional clients continue to increase their allocations to private alternatives,” said PGIM CEO and president David Hunt.
“Eric is uniquely qualified to lead PGIM Private Alternatives, having grown PGIM Real Estate into one of the largest real estate investors globally and leading a team of more than 1,200 investment professionals overseeing $210 billion in assets. I’m thrilled to see the next generation of PGIM’s growth in alternative investment strategies under his leadership.”
The move will see its existing real estate business – the third largest real estate investor and one of the largest agriculture investors globally – sharing a stable with the private capital business, which manages around $98 billion in private credit. Under the new structure the underlying investment strategies and portfolio and originations teams will remain separate, with each affiliate maintaining its own governance.
PGIM started expanding its private market capabilities with the 2021 acquisition of private equity secondaries specialist Montana Capital Partners and the purchase of a majority interest in Deerpath Capital in May this year. Its trajectory follows that of similar large asset managers, including BlackRock, which acquired private debt manager Kreos Capital in June and reshuffled the leadership of its alternatives unit in May to capture growing client demand it predicted would materialise in its 2021 investor presentation.
As active managers continue to lose market share to passive products, embracing the alternatives boom is one way back to the soaring profitability they’ve enjoyed in the low rates area. Closer to home, Franklin Templeton is looking to expand its Australian alternatives capability, while Magellan and other managers have flagged that they’ll open alternatives strategies or buy established businesses to round out their offerings.
