Global alternative assets are on track to increase to $15.3 trillion by 2020, PwC reported Monday.
Over the next five years, alternative asset managers will drive growth by calibrating their business and operations, and making technology a top investment priority, the report said.
According to PwC, a dynamic global economic environment has pushed asset management to the forefront of social economic change, and the need for sustainable long-term investment returns has put the spotlight on alternative asset classes.
Many alternative managers will shift to accessing new distribution channels and creating a broader asset class and product mix.
The report said some firms would still try to become more institutionalized, but brand-name players would strive to build industrial-strength operational platforms by revamping their business and infrastructure to be more agile, durable and scalable, with a high degree of efficiency and operating leverage.
Assets under management in the developing world will grow faster than those in the developed world, with the biggest allocation increases likely to go to private equity, real estate and infrastructure, according to PwC.
“The shift in global economic power from developed to developing regions will drive continued focus on sovereign investors, fast-growing institutions and the emerging middle classes in new markets,” PwC’s global alternative asset management leader Mike Greenstein said in a statement.
“These groups of investors will increasingly seek branded multi-capability alternative investment firms. Currently, a number of alternative firms exist in this category and others will aspire to join them.”
The new PwC report predicted that alternative firms and traditional ones trying to break into the alternatives sector would pursue one or more of three possible growth strategies:
- Building: looking inward for growth, leveraging their existing capabilities and talent
- Buying: seeking to acquire talent, track record and scale overnight
- Borrowing: partnering with other financial institutions to expand their capabilities and distribution channels
According to the report, alternative managers would likely develop increasingly sophisticated market strategies, focused more on distribution channels and better recognized brands.