When large numbers of institutional investors began to take up alternative investments, alternative managers could have been forgiven for believing it would be business as usual – just more of it. Even investors themselves might have initially been tolerant of the opaque goings-on at hedge funds and private equity shops – after all, investors were primarily looking for investment expertise and performance. All of that changed, however, with the global financial crisis in the first decade of this century, and the resultant regulatory response.
Once investors could see behind the curtain, their expectations rose. Investment expertise from GPs was still prized – but the “nice to have” amenities of the investor experience became more of a demand. In short, GPs continue to experience an investor-driven shift in how their value proposition is defined. Here’s a short list of key focus points for alternative managers as they consider the benefits of improved operational excellence.
- Broadly diversified managers and specialist GPs alike must understand that their operational capabilities form a core part of their value proposition.
- Ultimately, asset managers must determine whether they can enhance their investment expertise with a streamlined and technologically supported investor experience.
- Platforms such as SEI Trade enable seamless changes to workflows and processes to accommodate the ever-evolving legal and regulatory environment and operational requirements. They also enhance the investor experience by minimizing manual onboarding tasks associated with private fund investing, significantly improving and streamlining investors’ onboarding experience, while simultaneously reducing errors.
- The ability to embrace big data, robotics, and AI is becoming increasingly important, and in some instances, is a core requirement for managers to differentiate themselves in an increasingly crowded field.
- The talent search at asset managers will evolve to include more diverse skill sets and backgrounds to help firms transition toward priorities being driven by product proliferation, increased data analytics, as well as implementation of new technology throughout organizations.
- Convergence in alternatives is an old trend at this point, but its main knock-on effect remains – firms that make up the alternatives community now compete not only against each other, but also versus traditional (and often very low-fee) long-only products and solutions.
- Alternative managers have not been as quick as their long-only counterparts to outsource various aspects of their businesses, but this is changing as their operations become more complex and investor expectations rise. Fund accounting and administration are two of the most commonly outsourced functions.
- A wide variety of other back- and middle-office functions also are being outsourced by a significant number of firms, including regulatory compliance, data management, trade reconciliation, and so on. Almost one in three firms outsources investor reporting.
- As businesses become more complex, it will become increasingly critical that operations run on flexible, integrated platforms that focus on investor outcomes rather than the underlying technology.
- Systems will need to be capable of handling closed-end and commitment-based fund structures alongside more liquid portfolios. Listed securities and syndicated loans from around the world need to be accommodated alongside traditional assets.
- Full data transparency will increasingly be the norm, with multiple systems being able to talk to one another so managers can provide insights across asset classes, structures and vehicles. More sophisticated infrastructure will also enable multi-strategy funds to customize their risk exposures.
Learn more about SEI’s order processing manager and investor document tracking.
- Institutional Investor Allocator Intel Survey, March 2020
- Preqin Investor Outlook: Alternative Investments H1 2020
- EY 2019 Global Alternative Fund Survey
- 2017 SEI/Preqin LP Survey
- EY 2018 Global Alternative Fund Survey
- Deutsche Bank’s 18th Annual Alternative Investment Survey, 2020
- Going the Distance: The Expanding Lifecycles of Private Equity Funds, Pepper Hamilton LLP, 2017
- Alternative Asset Management 2020: Fast Forward to Centre Stage, PwC, 2015
- 2016 SEI Private Equity Survey
- EY 2019 Global Alternative Fund Survey
- 2017 SEI/Preqin GP Survey
- EY 2019 Global Alternative Fund Survey
- 2017 SEI/Preqin GP Survey
- 2017 SEI/Preqin GP Survey
- 2017 SEI/Preqin GP Survey
