With an uncertain economic road ahead, what’s on the minds of General Partner (GP) alternatives investors around the globe? Dynamo’s new survey of GP decision-makers explored noteworthy attitudes, predictions, and strategic plans among its client firms.
Headline results from the survey indicate that despite the potential rocky road in the near-term, GP investors remain focused on the long game. The majority plan to stay the course with their investment strategy, tighten costs and efficiencies, and continue investing in technology, which should support overall market strength.
For example, when asked how their investment strategies will change over the next 12 months, a majority (68%) plan to remain focused on a single asset class. Some plan to diversify, with 27% indicating movement to multiple asset classes.
Here are the highlights from the Dynamo GP Frontline Insight Report.
GP Challenges, Priorities, and Strategy
What topped the list of pain points for GPs comes as no surprise: fundraising in the current market environment was number one on their list.
But, this doesn’t mean GPs are changing tact – quite the opposite, in fact. They are flexing confidence in their existing investment strategies, with 68 percent saying they will not further diversify their portfolios in 2023. A majority, 81%, plan to deploy capital in the U.S. and Canada.
When ranking priorities over the next 12 months, GPs held protecting and maximizing the value of their portfolios as the top focus. Not far behind in the second spot was removing manual data tasks and introducing automated workflows, a sign that the potential for income reduction has reinvigorated their commitment to efficiency.
Additionally, GPs do not plan to increase their management fee structure, with 88% indicating they will stay the same in 2023, and another near 7% indicating a decrease.
GP FinTech Strategy
In a powerful nod to how GPs view technology’s ability to help them overcome challenges and deliver on stated priorities, tech budgets in 2023 appear virtually untouchable. 94% of the GPs surveyed said tech spend will increase or stay the same.
What do GPs hope to get from their technology investments? Optimization and efficiency topped their lists. When asked about their top priority for tech functionality, deal and customer relationship management just edged out portfolio management. But, creating efficiencies and optimizing workflows handily rose to the top of the list of importance for implementing new technology.
Where GPs and LPs Differ
Dynamo’s GP survey comes on the heels of its survey of LP alternatives investors in Q4 2022. This presented a welcome opportunity to uncover where GP and LP audiences are in sync, and where their responses diverged.
GPs and LPs seem to vary on alternatives allocations in 2023. 25 percent of GPs polled said they expect investors to reduce allocation to alternatives, where 96% of LPs said they’d increase or maintain alternatives allocation. While a majority of both audiences plan to deploy capital in the U.S. and Canada, outside of that, they differ on where they see opportunities across Asia, the Mideast and Africa.
GPs and LPs are largely aligned on technology focus, priorities, and budget. Creating efficiencies and optimizing workflows was at the top of the agenda for both audiences. Looking further down the list, some discrepancies surfaced. GPs ranked cost as a more important factor in tech implementations, where LPs were more concerned with API integrations.
Get the Full Picture of GP Attitudes, Predictions, and Strategic Plans
The full findings of Dynamo’s GP survey, which further detail how key decision-makers are paving the path for financial success in 2023, is available to download.
Dynamo Frontline Insight Report: Trends, Challenges, & Insights from Leading General Partners (GPs)
Steve Tobio is a vice president with alternative investments FinTech Dynamo.