Race for Assets – Alternative Investments Surge Ahead

ByBritt Tunick

BNY Mellon’s new survey, conducted in partnership with FT Remark, reveals a bright outlook for alternative assets. Investors are satisfied with the returns their alternative exposures are generating, and the vast majority feel that performance has either met or exceeded expectations. Indeed, more than half of respondents expect allocations to increase over the coming 12 months.

While investors are broadly positive about their experience of alternative allocations, they are putting pressure on managers to improve. Fees remain an item under negotiation, and investors are pushing for greater control and transparency. Fortunately, managers recognize the need to meet these demands, through the use of new operational solutions and cutting-edge technology.

The full report (the first chapter of a series) demonstrates how a greater understanding between investors and fund managers, enabled by new technologies, will take the industry to a new level and further establish alternative assets as mainstream investments.

Key Findings:

Five key insights that investors and fund managers need to know

  1. Alternative asset appetite is insatiable. Over half (53%) of respondents expect allocations to alternatives to increase in the next 12 months. What’s driving the hunger?
  2. Asset classes jockey for share. Which ones lead the way? Private equity has the highest share of institutions’ alternative asset allocations and highest levels of outperformance. But the rising stars are real estate and private debt, whose share of allocation continues to grow.
  3. Hedge funds hit back. How will they regain their ground? After a period of disappointing returns, nearly two-thirds of respondents say they are more positive about the prospects for hedge funds than they were a year ago. How are hedge funds using technology to win back investors?
  4. Investors are speaking loudly. Are fund managers listening? Institutional investors want more control over investment direction and fees, as well as more transparency into where their money is going. Managers are listening. 98% of managers say that investor demands are leading them to focus on how technology infrastructure can help support operational efficiencies.
  5. Asset managers turn to tech. From big data to predictive analytics and the use of satellite imagery, technology is set to be the key driving force behind the alternative assets industry in the years to come.

The full report is available here.