Hedge fund managers are innovating and increasing their investment in technology to create new competitive advantages and to address regulatory and operational issues, according to a new study by KPMG International, the Alternative Investment Management Association (AIMA) and Managed Funds Association (MFA) titled Transformative Change: How innovation and technology are shaping an industry.
The Asset Managers world-wide are on defensive given to ultra low rates in bonds. The banks are failing to thrive and the investors are earning almost nothing to hold bonds. An equity research report called “Switching to an Inorganic Diet”, Goldman Sachs & Co. said that they expect near zero rates to cut into European Asset Management industry’s growth, stymie product development, make managers even more sensitive to competition from low-cost index funds and put pressure on prices. The resultant, they expect a busy season of mergers & acquisitions coming up ahead as asset managers seek partners for a way out of the morass.
It’s no different than comparing stocks to bonds
There are plenty of reasons for financial advisers to be leery of alternative investments, but most of them are related to a lack of understanding and comparisons to the wrong kinds of benchmarks. In the wake of an unprecedented bull market for stocks, it is easy to just focus on the relative under-performance and higher fees of alternative-strategy mutual funds.
According to latest Context Summits 2016 Allocator Trends Survey, 92% of the investors surveyed, invested in two or more alternative investment funds in 2016. Allocators concerned about upcoming US Presidential Election, as 59 percent of investors viewed this event as the greatest macro headwind to the markets in Q4 2016. In total, managers and allocators representing over $250 billion in combined assets attended the two-day conference, which connects qualified investors with private fund managers via one-on-one meetings.
Chile’s $176 billion pension fund industry is about to get a whole new range of investment options. President Michelle Bachelet signed a law Thursday that will allow pension funds, known as AFPs, to invest directly in closely held companies and real estate for the first time, as well as buy shares in infrastructure concessions. The law will come into effect in 12 months, when all the accompanying regulations are in place.
The estimated global pool of assets in alternative investment (AI) under managing is over $10 trillion, said Jo Murphy, Managing Director- Asia Pacific, CAIA Association. In an exclusive interview with ETMarkets’ Kshitij Anand , Murphy said cumulative funds raised in India as of June 2016 was Rs 26,003 crore – a five-fold increase over 2014.
Science fiction author William Gibson once observed that “The future is already here, it’s just not evenly distributed.” The same can said for alpha, or the ability of money managers to deliver market-beating returns.
Reports of high fees and under-performance have long dogged the alternative investment world, mainly private-equity, venture-capital and especially hedge funds. Last year, returns were negative versus slight gains in total returns for most benchmarks. This year, the Hedge Fund Research Index has gained half as much as the Standard & Poor’s 500 Index.
When most people think about investing, traditional methods such as stocks and bonds usually come to mind. In the past, these have been the main options available to everyday investors.
While diversification is possible through these investments, the drawback is that their overall performance is linked to the global economy. That means they tend to rise or fall in tandem, and there’s little protection against losses in the event of a global economic crisis.
“It is fair to say that regulatory fatigue has set in when it comes to the European Union market. This has been brought about in particular by the Alternative Investment Fund Managers Directive (AIFMD).” Scott Price, Maitland.
Yet the EU remains attractive to US alternative investment managers, particularly post-Brexit. Many investors in the EU and the UK are seeking opportunities to invest in US funds and US strategies – and demand is likely to remain high during a protracted period of uncertainty following Brexit.
Exchange-traded products are becoming an important part of the alternative investment market. ETFs have and will continue to “democratize” the investment world by allowing investors low-cost access to asset classes previously available only to sophisticated institutional investors. At the same time they are an increasingly important tool for those institutional investors who use ETFs for both basic and custom exposures. Institutions that would never use a conventional mutual fund will use an ETF if it delivers a desired exposure more efficiently than a competing future, swap or separate account.