By increasing the number of alternative products and strategies it offers, Mellon Capital Management Corp. has generated inflows in the past three years, despite difficult market conditions.
Since 2005, assets under management at the San Francisco quantitative investment management unit of Bank of New York Mellon Corp. have grown 62.3%, to $204.2 billion as of June 30. The percentage of its assets in alternative investment strategies has nearly doubled, to 13.3%.
Jim Tufts, an executive vice president and head of client service and marketing for Mellon Capital, said he expects alternative assets to continue to expand as plan sponsors become more comfortable investing in such products.
"We think that the level of popularity of alternative assets hasn't even reached maturity yet," he said. "We expect that alternative investments will become an even bigger part of the average institutional investor's portfolio over time."
Alternative products like the Advanced Beta Strategy have allowed Mellon Capital "to do pretty well, despite the market cycle, because we were not as heavily involved in traditional long-only products," Tufts said. "We have developed a longer track record with alternative products and 130/30 funds, and investors are responding to that."
Institutional customers, specifically endowments and foundations, are altering their investment strategies in favor of alternative products, including 130/30 funds and long-short strategies, he said.
"Some are less aggressive; some are more aggressive," he said. "Some investors are putting more than 50% of their assets into the alternative bucket."