A State Street survey of 391 alternative fund managers, conducted in collaboration with UK researcher Preqin, found that managers were also concerned about generating performance (54 per cent), adapting to regulation (38 per cent), preserving margin (20 per cent) and fulfilling investor demands (18 per cent).
The primary concern, about increased competition for capital, is a result of more capital flowing into alternatives, according to State Street.
Investors also have higher expectations of alternative managers, said the State Street report.
“They are gravitating to larger fund managers who can offer scale and institutional-quality practices, such as advanced reporting for transparency in risk and performance,” said the report.
Niche alternatives managers may also have the opportunity to pick up institutional mandates by “paying close attention to investor appetite and by structuring their funds accordingly”, the report said.
Performance is also front of mind of investors, putting pressure on alternatives managers.
“Twenty-nine per cent of alternative fund managers surveyed indicated they planned to add new investment strategies with in-house resources over the next five years, while 25 per cent said they have done this since 2008,” State Street said.
Regulatory pressures are driving up operating costs for alternatives managers, which is “forcing fund managers to seek out new efficiencies”, according to the report. “Leading managers are looking to develop more advanced back-office operations, as well as operational and investment infrastructure.”
Thirty-two per cent of alternative managers said they have reported more frequently to investors since 2008, and 8 per cent of managers plan to increase their reporting frequency over the next five years.
“[Alternative] managers who have the right systems to capture, structure and report data on demand for their stakeholders will have a clear advantage,” said the report.
