During September, the firms surveyed decision-makers within the limited partner and asset allocator marketplace.

A survey of alternative investments allocators showed that they intend to boost (55 per cent) or maintain (41 per cent) exposure to these assets, highlighting their attractions at a time of inflation, rising rates and stock market volatility.

The findings come from US-based fintech business Dynamo Software, in partnership with Northfield Information Services.

The survey is entitled Trends, Challenges, & Insights from Leading LPs & Asset Allocators. During September, the firms surveyed decision-makers within the limited partner and asset allocator marketplace.

The research uncovered attitudes, predictions and strategic plans for the next 12 months.

Sectors such as private equity, credit, real estate, and infrastructure have flourished in recent years because they produce the superior yields that typically come with less liquid assets. In the case of certain hedge fund strategies, macro-funds have fared well in 2022, contrasting with the heavy losses sustained by most equity markets. Some commodities have prospered amid skyrocketing energy prices and supply-chain disruptions. More broadly, there has been a secular shift from public to private markets over the past two decades and this remains a talking point in the world’s wealth sector.

When asked how they plan to invest in alternatives, respondents overwhelmingly chose fund managers, with 77 per cent selecting that allocation. Co-investments and direct investments followed behind at 55 per cent and 42 per cent, respectively. Secondaries (28 per cent), derivatives (19 per cent) and cryptocurrencies (13 per cent) each made an appearance on the list of top alternatives for 2023.

When asked to rank the challenges they are currently facing within their investment processes, participants placed “document collection and/or data extraction” as the top issue, followed by “comprehensive views of portfolio exposures,” and “managing risk” in third place. Some 94 per cent of those questioned said they intend to spend the same (43 per cent) or more (51 per cent) on technology to solve for these difficulties.

Nearly eight in 10 (77 per cent) respondents did not think that all their investment processes could be considered “excellent.” In fact, 11 per cent characterized their processes as “poor.”

Talent management
Although “recruiting and retaining talented employees” ranked second among the most important areas of focus for LPs and asset allocators, respondents also acknowledged the need to empower existing employees. The “ability to better enable [our] team to manage new investment structures” was among the top three priorities for 2023, as was “managing key relationships.”

Expanding on the link between tech and talent, survey participants cited technology as one of the most significant initiatives brought about by the pandemic. When asked about the biggest impact of the shift to remote work, 35 per cent chose “the adoption of new technology to improve workflow and communications.”

Dynamo’s cloud-based solutions serve the private investment landscape, including private equity and venture capital funds, real estate investment firms, infrastructure, hedge funds, endowments, pensions, foundations, prime brokers, fund of funds, family offices, and fund administrators. Dynamo was founded in 1988. Northfield, founded in 1985, is a risk management analytics provider, based in Boston, with offices in London and Sydney.

The article was published in Family Wealth Report on November 10, 2022.

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