A study undertaken by EY revealed that 20 per cent of investors globally planned to decrease allocations to hedge funds in 2018, which continues a multiyear trend.
The study, the ‘EY Global Alternative Fund Survey’, found that investor desire for customisation and non-traditional, uncorrelated exposures lead to an increased convergence of alternative asset business models.
Hedge fund managers are finding increased competition as each taps into investor desire for non-traditional offerings like private credit and real assets according to EY.
In Asia-Pacific, just 18 per cent of hedge fund managers offer private credit and only 14 per cent have private equity.
EY Oceania wealth and asset management leader Antoinette Elias said that alternative asset managers are grappling with a whirlwind of changes and have to act now to address disruptions.
“They can either act now to address industry disruptions – ranging from technological innovation to products and competition from new players – or admit defeat and lose competitive market share.
“In order for alternatives to stay ahead, they need to meet investor demand for customization, implement technology that augments investment decisions, and hire the proper talent to both manage technology and bring outside thinking to the traditional financial services mindset,” she said.
Ms Elias also said hedge fund firms needed to have formal talent management in place as investors were actively seeking formal talent programs.
“Firms need to integrate technology skill sets with traditional finance professionals, which can be a challenging balance to achieve. Further, there is strong competition for data scientists, programmers and other in-demand skill sets among alternative asset management firms,” she said.
Hedge fund managers are rapidly embracing technology, with 16 per cent having implemented AI and a further 32 per cent exploring plans to implement the technology.
EY Oceania hedge fund leader Rohit Khanna said that managers saw the benefit in the technology and it was being actively sought after by clients.
“Investors are actively seeking out managers that are exploring new innovations to deliver alpha. Not long ago we were only talking about quantitative managers utilizing these techniques; however, we continue to see increased adoption and use cases across all strategies,” he said.
