… as EY examines the trend with the ‘new’ alternatives

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With more investors increasing allocations to private equity and other alternative asset classes, largely at the expense of traditional hedge fund offerings, alternative fund managers across Australia and the Asia-Pacific are examining their strategic priorities and focusing on how to develop products and prepare their business for a rapidly evolving future.

Antoinette Elias, EY’s ‘Oceania Wealth and Asset Management Sector Leader’, and the global wealth and asset management team spoke with hedge funds and private equity firms for the 2019 EY Global Alternative Fund Survey looking for the challenges and opportunities. The report follows a survey of 209 alternatives managers and 62 big investyors. Key findings include:

  • Continuing a trend for the past several years, funds allocated to hedge funds fell by another 7 per cent globally, while funds allocated to private equity increased by 7 per cent
  • “A number of funs [managers]plan to enter the Australian market to leverage demand and growth in the superannuation sector, primarily in the form of listed investment products
  • In Asia, alternative fund managers report most asset growth in the past two years has come from family offices and high-net-worth investors, while in North America and Europe most growth has tended to come from pension funds, and
  • ESG overlays and products are increasingly important in the alternatives space
  • Australian fund managers are increasingly looking to leverage technology from a distribution and platform perspective, particularly targeting the SMSF market.

Antoine Elias said about trends in the Australasian region: “In Australia, we’re seeing a continued increased allocation shift from hedge funds and into private equity. We’re also seeing growing interest in private credit and real estate offerings as asset managers look to further diversify their portfolios. We expect to see a number of international companies entering the Australian market in the next six months to leverage demand and growth in the superannuation sector, primarily in the form of listed investment products.

“In the coming years, alternative fund managers in Asia-Pacific should expect to see greater AUM growth from family offices, high net worth investors, and private wealth management platforms. Employee retention is a bigger issue for alternative fund leaders in Asia-Pacific compared with the global average, with more than half saying that retention is a top three priority for them. Surprisingly, fund managers in Asia-Pacific are less likely to prioritise digital transformation in the front office. Asia-based fund managers are behind the curve in technology investment, and those organisations that have made.”

– G.B.

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