State Street Survey Debunks Misconceptions about the Alternative Investment Industry
September 17 2013 - 9:00AM
Business Wire
Investors are leading the way in shaping the future of the
alternative investment industry, according to a soon to be
published global survey by State Street1, in collaboration with
Preqin*, of nearly 400 leading alternative fund managers from hedge
funds, private equity firms and real estate funds. “The Next
Alternative: Thriving in a New Fund Environment” finds that fund
managers see investor demands for greater transparency, more
favorable fees and greater liquidity at the fund level as three of
the top five drivers of change over the next five years.
“Alternative asset managers that want to create a competitive
edge need to balance meeting new requirements from investors and
regulators while ensuring operational and performance excellence,”
said George Sullivan, executive vice president and global head of
State Street’s Alternative Investment Solutions. “The mainstreaming
of this asset class debunks common misconceptions that have
hindered opportunities for investors and fund managers alike.”
Some of those common misconceptions about the alternative fund
industry are:
Misconception: Alternative fund managers have
been reluctant to offer greater transparency into fund performance
and risk
Reality: Managers are reporting more
information to investors, more frequently. Forty-four percent
of fund managers have increased the amount of information they
report on their holdings, risk and performance since 2008 and an
additional 16 percent plan to do so over the next five years.
Almost one third (32 percent) have increased their reporting
frequency since the financial crisis. Capturing, structuring and
reporting data “on demand” for stakeholders will give managers a
clear advantage as investor demand for greater transparency in risk
and performance was the most cited driver of change in the
alternative fund industry today.
Misconception: The era of major change in the
alternative sector is largely finished
Reality: Growing competition means that
alternative fund managers are reassessing their fee structures and
seeking ways to differentiate their offerings with new product and
investment strategies. Twenty-nine percent of alternative fund
managers surveyed indicated they planned to add new investment
strategies with in-house resources over the next five years, while
25 percent said they have done this since 2008.
Misconception: Alternative industry
regulation is stifling growth and innovation
Reality: Although burdensome for
many, the new era of heightened regulation is also creating
opportunities for managers to distinguish themselves from peers and
tap into investor appetite for increased transparency and
oversight. Of the 86 percent of alternative fund managers who
expect their costs to increase over the next five years, largely
driven by regulation, 75 percent are optimistic that this will not
constrain their growth potential.
“This survey highlights key changes that are coinciding with the
growth and maturation of alternatives as an asset class and offers
a glimpse into what the next five years will look like for the
industry,” continued Sullivan. “Managers who remain innovative as
they respond to demands from investors will be positioned for
success in this new era where investors will look to employ
alternatives more commonly than ever before.”
Important trends and possible shifts in the industry over the
next five years include:
Regional expansion: Nearly one in five
fund managers (18 percent) surveyed plan to expand into new regions
by 2018
More managed accounts: More than one
in four (26 percent) have introduced managed accounts in the past
five years, and another 18 percent plan to do so by 2018
More hybrid funds: A majority of
respondents (58 percent) say that hybrid alternative fund
structures, which blend features of traditional hedge fund and
private equity vehicles, will increase over the next five years
M&A activity is set to increase:
10 percent of fund managers plan to acquire another business in the
next five years; this compares to 7 percent who have already done
so in the past five years
For further information on the study and to view the executive
summary, please click here. For special materials and other
information, follow State Street on Twitter @State Street.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $25.7 trillion in assets
under custody and administration and $2.1 trillion in assets under
management* at June 30, 2013, State Street operates in more than
100 geographic markets worldwide, including the U.S., Canada,
Europe, the Middle East and Asia. For more information, visit State
Street’s web site at www.statestreet.com.
* This AUM includes the assets of the SPDR Gold Trust (approx.
$37 billion as of June 30, 2013), for which State Street Global
Markets, LLC, an affiliate of State Street Global Advisors, serves
as the marketing agent.
CORP-0851
1 State Street, in collaboration with Preqin, a leading research
consultancy focused on alternative asset classes, conducted a
survey, examines the current state and future outlook for the
global alternative fund management industry. Conducted in July
2013, The survey garnered 391 responses from alternative fund
managers globally: 55% North American; 29% European; 10%
Asia-Pacific and 6% other
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