The overwhelming majority of big investors like areas such as private equity and real estate but valuations are becoming too hot for comfort.

The vast majority - 80 per cent - of institutional investors put money into alternatives such as hedge funds, private equity and real estate but there are signs that valuations in some areas are making them nervous, figures show.

The findings come from research among 550 institutions in December last year by Preqin Research  into attitudes towards alternative investments. Among the findings, some 52 per cent of those surveyed put money into three or more asset classes. The most popular in terms of engagement are real estate and private equity, with 59 per cent and 58 per cent of investors involved, respectively. 

The sector has benefited - with some exceptions - from its presumed ability to return superior yields than some conventional listed markets in recent years, particularly at a time of ultra-low or even negative interest rates. However, a concern for some months has been that valuations in parts of the alternatives market are getting stretched.

Private equity and infrastructure were the most well-perceived asset classes in 2017: 63 per cent of investors report feeling positive towards private equity, and 53 per cent said they were positive towards infrastructure.

The majority of investors in all private capital asset classes cited valuations as a key concern in 2018, continuing a trend seen in recent years. Among private equity investors, 88 per cent identified it as an issue.