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Investors in alternative funds start looking at costs, yields and strategies with magnifying glass

  • Investors expect much more from their alternative fund providers than in the past.
  • Some firms are convinced that the HNW market is very promising.
  • For accredited US investors good quality products are missing.

The alternative fund industry is changing rapidly. Investors are hypersensitive to the value for money, and very aware of paying mostly for alpha. They are also increasingly attentive to the overall results rather than simply the raw performance and demand better customized strategies. And they want all this in tariff levels that many in the alternative investment industry would not have considered a decade ago.

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These are the first results of the survey of alternative fund managers carried out by PWC and the Alternative Investment Management Association (AIMA).

The survey revealed that investors expect much more from their alternative fund providers than in the past. The report, " Global Alternatives Distribution Survey 2018: The right strategy, at the right price ", evaluates the impact of this change on the behavior and expectations of investors on alternative models of fund distribution.

In the United States, endowments will continue to be the most selective type of investor in the next three years, as they were in the last survey, and it is expected that pension plans will continue to be the second to allocate capital to alternative strategies.

However, only the largest alternative fund managers will be able to access the US pension plan market. A small investment manager pointed out the difficulties for the smaller players: "Pension plans invest mainly through consultants, so it is difficult to attract capital to funds under one billion dollars because they are not on the radar screen of the consultants ".

HNW Clients

HNW individuals will continue to be the sixth most desired type of investors in the United States. The main reason why the HNW client only occupies the sixth place is that this category of investors rarely addresses individually these days.

There are a number of large alternative platforms, mainly created by large investment banks , that allocate alternative funds on behalf of a large number of HNW investors. Therefore, it is likely that HNW investors have now become part of the institutional mix from a marketing point of view, although not necessarily from a regulatory perspective.

Some firms, however, are convinced that the HNW market is very promising and that the only problem is the lack of commitment on the part of suppliers.

A great manager of alternative and traditional funds of the United States explained: "For the accredited US investors, there is a lack of good quality products adapted to their needs, we believe that we have the products to fill this gap and we are working on our distribution strategy. "

In the United States, endowments, foundations and charities represent a much larger type of investment than in other regions.

SUBMITTED BY By Funds Society, Madrid