Alternative Investment Outlook
Finding agility in uneven conditions
From the U.S. Center for Financial Services
Learn how alternative investment managers are navigating new terrain and responding to increased investor demands and an ever-shifting regulatory landscape.
The priorities for alternative investment are expected to be:
- Attracting new assets with scale and differentiating strategies
- Creating a competitive advantage through better data
- Managing external relationships and reputational risks
One of the key attributes that has drawn investors to alternative investment managers over the years is their agility. Much like a downhill skier who needs to absorb the terrain to excel, these managers excel by navigating uneven conditions. Over the past few years though, the landscape has leveled out, with the booming stock market temporarily eroding alternative investment funds’ historic competitive advantage.
A turning point is already unfolding in 2014. Institutional investors are piling into alternatives despite their recent uneven performance. These investors are attracted to the industry’s long-term track record for producing non-correlated, superior risk-adjusted returns. At the same time, they are looking at alternatives through a new lens. Rather than viewing them as a separate asset class, institutional investors are increasingly deconstructing alternatives into risk and attribution themes.
How alternative investment leaders meet these demands, along with those of an ever-shifting regulatory landscape, will be a key theme to watch as funds look to stay agile and attract more assets. Given the perennial importance of reputation in this industry, they will also need to ensure their risk management approaches mature to reflect today’s increasing complexity.