Sixty per cent of infrastructure managers, 44 per cent of real estate managers and 39 per cent of private equity managers expect their assets under management to grow by at least 50 per cent over the next five years, the report, entitled Building for the future: How alternative investment managers are rising to the demographic challenge, said.

Institutional investors, namely pension funds and family offices, currently have the biggest appetite for “real investments,” BNY Mellon said. With that said, nearly half of the private equity and real estate fund managers anticipate that retail investors will account for a higher level of capital inflows by 2020 than they do today. Mass affluent and high net worth individuals in developing markets will also contribute to growth in these sectors, the report noted.

“Investors are turning more and more to real assets to find yield, diversify their portfolios, and steer through volatile markets,” said Alan Flanagan, global head of private equity and real estate fund services at BNY Mellon. “The growth in real asset investments has been impressive and there is no sign of it slowing down. As a result, the marketplace has become increasingly competitive on deal sourcing, presenting challenges for managers to successfully deploy the capital they have raised.”

The report also looked at the need for transparency, which BNY Mellon said is “prompting a growing number of managers to consider outsourcing certain functions,” with two-thirds of fund managers across all asset classes saying they feel that regulation might lead to outsourcing in the future. “Cost was the most commonly stated reason to outsource, in addition to having access to enriched data and analytics from an outsourcing provider and access to the expertise of external staff,” it added.