The vast majority of private banks said performance is the most important factor when scrutinising third-party alternative asset managers. Risk controls and fees and expenses are the second- and third-most-important factors when selecting fund managers.

And when it comes to deciding whether to fire a manager, private banks are more likely to pull the trigger than with institutions such as retirement schemes the report said. Some 72 per cent of the private banks Cerulli surveyed reported that performance is among the top factors when deciding to remove managers from their lists. In contrast, Cerulli's conversations with pension funds suggest that some can tolerate underperformance for a few years.

The difference in willingness to bear performance setbacks is significant because private banks and discretionary fund managers play a large role in the alternative investments pipeline, Justina Deveikyte, associate director of European institutional research at Cerulli, said.

Cerulli's research into the European alternative investment space also found that some asset managers are looking to build their alternative business by developing partnerships with sub-advisors to complement their in-house expertise.

Cerulli's survey of asset managers found that one-third of respondents use sub-advisory partnerships to gain alternative investments expertise. However, most managers still prefer to hire investment professionals from other firms or train their existing staff to become alternative experts.

The figures come from Cerulli’s report, entitled European Alternative Investments 2018: The Next Steps in Product Development.