Asset managers have taken notice of the the proliferation of alternative mutual funds in the retail and institutional channels and have changed their game plan accordingly.  

According to a recent Cerulli Associates survey, one-third of managers expect alternative assets to represent 50% or more of their firm’s total assets under management in three years. And in 10 years, the most bullish manager anticipates that 40% of mutual fund assets will be in alternative products, while on average, they are expected to make up 15.8% of total mutual funds, up from less than 3% at the end of 2012.

The research firm noted that over the past decade, traditional asset managers such as Legg Mason and OppenheimerFunds have been slowly crossing over into the alternatives space, while during the past five years, an expanding number of hedge fund providers such as AQR Capital Management have launched alternative mutual funds.

Not to be left out of the mix, private equity firms are also making a foray into the retail space, with both the Blackstone Group and Kohlberg Kravis Roberts launching their first mutual funds at the end of 2012. In addition, private equity firms and other asset managers have bought their way into the retail space. For instance, in 2012, 46 of the 137 recorded asset manager M&A transactions were for deals involving alternative asset management firms, according to Cerulli, citing data from Freeman & Co.’s 2012 financial services M&A activity overview.

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