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January 09, 2018 at 07:58 AM
Investors continue to flock to the alternative investment space, bringing about changes in the sector that have major implications for how managers run their businesses and the infrastructure they need to support their investment acumen, according to a survey of 70 institutional investors released Tuesday by SEI.
Today, 80% of institutional investors globally allocate to at least one asset class within the alternatives universe, SEI reported, citing findings by alternatives data provider Preqin with which it prepared the report.
However, as asset classes converge, investment vehicles evolve and business models change, investors and managers alike are uncertain how to best take advantage of this positive outlook, according to the report.
The survey confirmed that operational considerations were becoming more prominent even as manager evaluation and due diligence focused on the investment team and its process remained critical.
According to the report, growing institutional demand has been accompanied by increasingly diverse and complicated portfolio holdings for many investors, consisting of stakes in a mix of limited partnerships, co-investments and direct holdings, which bring oversight and administrative challenges of their own.
SEI noted that some big investors, such as CalPERS, were significantly reducing the number of alternative managers with which they partner as they grapple with the complexities of running their investments and strive to reduce overall portfolio expenses.
Nevertheless, it said, “the story of alternatives is still about growth — where investors are receiving record distributions and planning increased allocations to both funds and direct investments even as they seek to rebalance across asset classes.”
