As the market outlook strengthens, alternative investment funds and their investors are beginning to push for ways to achieve greater growth.
According to a recent report from Preqin, the alternatives industry is now expected to grow to $14trn by 2023*. Fund managers are already gearing up to attract capital with 60% indicating that new client acquisition is their top objective in 2019**.
While the macro theme of the alternatives industry appears to be growth, managers can’t just sit back and wait for new investor mandates to come rolling in. To the contrary, they’ll have to step up their game to compete for investor dollars now more than ever before. That’s because there’s been seismic developments in investment preferences among institutional investors and allocators in alternatives.
One significant change is that investors are increasingly looking to take a more direct role in investing. According to an EY survey, 70% of limited partners expect to take a more active or direct role with their investments in alternatives in the next two years. Additionally, investors are opting for more individualized services and solutions from managers that fit their specific needs****. While these changes can bring the benefit of new and diversified revenue streams, and could potentially deepen investor/manager relationships, they can also introduce new challenges. As one could imagine, a shift to more customizable offerings means managers will be required to provide even more information to their investors, likely from disparate internal and external sources, which in turn puts increased pressure on the operational infrastructure.
But in spite of the challenges, this shift to a more investor-centric service model is well underway. Industry-leading managers are modernizing their investor relations operations to not only retain existing investors, but also to attract new ones. Encouragingly, 60% of fund managers say they either recently have, or are planning to make technology investments in the area of investor relations***. One exciting area they’re looking into is digital technology, which is critical in helping to automate more business processes to reduce the time and cost of operational activities. With an investor-centric business model, coupled with the right digital solutions, investor relations and marketing teams can be empowered to focus more of their time and energy on meeting with potential investors and growing assets.
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* Preqin. Alternatives in 2019.
** FIS. Readiness report. 2018
*** EY. 2018 global alternative fund survey.
**** Jefferies. The State of Our Union. 2019.