Alternative Allocations: Lessons Learned From Institutions

At a recent educational event organized by Franklin Templeton, Franklin Templeton Institute’s Senior Alternative Investment Strategist Tony Davidow hosted a day of panels that focused on alternative investments. This article provides insights gained from these discussions, such as lessons learned from institutional clients that can be applied to other client segments.

We recently hosted a group of global institutional clients for an educational event in our San Mateo, CA, headquarters. Our clients joined us from 23 different countries including Singapore, the Philippines, Thailand, Brazil, Mexico, Chile, Saudi Arabia, South Africa and Malaysia. The program highlighted the depth and breadth of resources offered by Franklin Templeton and our Specialist Investment Managers (SIMs), and we examined the global economies, capital markets and opportunities across traditional and alternative investments.

Tony Davidow

I served as the host and moderator on a dedicated day focused on alternative investments and began the day by highlighting the alternative allocations across institutional segments (see the chart below). Consistent with our clients, institutions have varying degrees of allocations based on their size, access and the sophistication of the investment committee.

The allocations also vary by institutional segment. Pension plans (public and private) can model their cash flow needs due to the predictable nature of retirement distributions. Endowments, foundations and sovereign wealth funds’ time horizons are often viewed in perpetuity. Consequently, their respective allocations vary based on the amount of assets allocated to alternatives and the types of alternative investments included.

How Institutions Allocate to Alternative