Press Releases

GLOBAL – June 23, 2008 - During 2007 alternative assets* managed on behalf of pension funds by the world’s largest 99 investment managers grew by 40% to US$822bn from US$586bn the year before, according to the latest Global Alternatives 99 research produced by Watson Wyatt in conjunction with Global Investor magazine. According to the research, over half the top 99 managers are based in the US, while over a third are based in Europe. Real estate managers lead the ranking, occupying the top nine positions and accounting for 62% of the assets. Infrastructure managers were included in the research for the first time this year and all ten new entrants were ranked in the top 99 and account for 5% of the assets.

Roger Urwin, Global Head of Investment Consulting at Watson Wyatt, said: “There is no let up in the demand for alternative assets as pension funds around the world seek to diversify their portfolios and capture alpha through absolute return strategies. This is the main reason for such significant growth of assets, with the larger firms being the main beneficiaries of growth. Other features of the year were the increasing concentration and ongoing consolidation in the industry as well as the rise of infrastructure as an asset class.”

Data from the wider survey shows that, at the end of 2007, the top 50 managers within the areas of real estate, fund of hedge funds (FoHFs) and private equity fund of funds (PEFoFs) managed US$512 billion, US$146bn and US$139bn respectively. Infrastructure and commodities remain smaller, but growing alternatives classes among pension funds with the top 10 managers in these areas being responsible for US$43bn and US$16bn of assets respectively.

Roger Urwin said; “Changing pension fund needs and globalisation are forcing many asset management firms to innovate and refocus; larger firms, with more alternatives products, are proving to be more successful in this rapidly changing landscape.”

According to the research, the majority (47%) of alternative assets managed on behalf of pension funds are invested in North America, while 39% are invested in Europe and 10% in Asia-Pacific. In terms of the domiciles, North American managers account for 63% of total assets, while UK and continental European managers account for 18% and 12% respectively. Asia Pacific is represented by 11 managers from Australia and Hong Kong and which account for 7% of total assets.

Roger Urwin said: “The movement of assets into alternatives has continued unabated despite the high fees and costs and the mixed ability of managers to deliver good performance. There are signs of change as we move into a different market environment where managers will have to work harder to justify their charges. The trends we see are: more need for transparency, particularly the separate identification of alpha and beta; an increased focus on risk; and the increased appetite for direct investment in private equity and hedge funds.”

In terms of managers included within the survey, AEW Capital Management is the largest real estate manager of pension fund assets in the world with US$47.4bn, while HarbourVest Partners tops the PEFoF table with US$20.1bn. The survey also reveals that Blackstone Alternative Asset Management manages the largest proportion of FoHF assets on behalf of pension funds, with a total of US$15.4bn. Macquarie Group tops the Infrastructure table with US$20.1bn while Allianz SE is the leading pension fund commodities manager with US$7.0bn.

For the full Global Alternatives Survey and ranking please click here

Notes to editors

Watson Wyatt conducted this survey for the year to December 2007 to rank the largest investment managers in the areas of real estate, fund hedge of funds, private equity fund of funds, infrastructure and commodities. The survey includes 190 investment manager entries (up from 150) comprises: 57 in fund of hedge funds, 52 in real estate, 50 in private equity fund of funds, 14 in commodities and 17 in infrastructure. In the private equity and hedge fund area, this ranking is focused purely on fund of funds which have traditionally been of most interest to pension funds. For real estate, commodities and infrastructure, direct managers are included.

For further information please contact:

Paul Deane-Williams
Head of Public Relations - Investment
Watson Wyatt Limited
+44 (0)1737 274397
paul.deane-williams@watsonwyatt.com

Gay Collins / Matthew Battersby
Penrose Financial
+44 (0)207 786 4869
watsonwyatt@penrose.co.uk

About Watson Wyatt Investment Consulting

Watson Wyatt Investment Consulting, a division of Watson Wyatt, is focused on creating financial value for institutional investors through independent, best-in-class investment advice. We are specialist investment professionals who provide co-ordinated investment strategy advice based on expertise in risk assessment, strategic asset allocation, and investment manager selection. Watson Wyatt Investment Consulting provides investment advice to some of the world’s largest pension funds and institutional investors, and has over 450 associates in Europe, the Americas and Asia.

In the US investment advisory and investment consulting services are provided by Watson Wyatt Investment Consulting, Inc., which is a subsidiary of Watson Wyatt Worldwide Inc. Watson Wyatt Investment Consulting, Inc., is a registered investment adviser with the Securities and Exchange Commission.

About Watson Wyatt

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the world’s leading organisations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,000 associates in 32 countries and is located on the web at www.watsonwyatt.com