The term "alternative assets" conjures up an image of the counterculture-tie-dye shirts and magic mushrooms. But in financial jargon it means those assets that are not equities, bonds or cash. It covers everything from hedge funds to property, infrastructure projects to art. When the stockmarket was rising by 20% a year in the late 1990s, interest in alternatives was limited. Equities provided all the excitement that investors needed. But in recent years a combination of poor stockmarkets and low bond yields have made alternatives fashionable. Since 1995 global pension funds have increased their portfolio allocation to alternatives from 5% to 19%. In just the past two years there has been a 15% increase in the assets managed by alternatives managers on behalf of insurance companies, according to a new survey by Towers Watson, a consultancy. The 100 biggest alternatives managers look after more than $3 trillion of assets.
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