The alternative funds industry has deftly navigated pandemic-related disruption and uncertainties, and firms are now considering issues that will transform the sector for years to come, according to a survey released Monday by EY.
The research demonstrates the alternative industry’s resilience and the key transformations managers and investors are partnering to bring about, Natalie Deak Jaros, co-leader of EY Global Hedge Fund and assurance leader at Americas Wealth & Asset Management, said in a statement.
“2021 was a year in which the industry invested to build significant momentum around various initiatives that will pay dividends for years to come,” she said.
From July to September, Greenwich Associates conducted interviews with 107 hedge funds representing $1.2 trillion in assets under management, 103 private equity firms representing nearly $2.7 trillion and 54 institutional investors with approximately $1 trillion in assets under management.
Embracing New Investment Themes
The survey found that the industry embraced new and evolving investment opportunities and themes in 2021, leading to increased investment in the alternative fund space.
Digital assets have attracted the attention of alternative fund managers and investors. While only one in 10 managers reported having current exposure to cryptocurrencies, a quarter of hedge funds said they expect to increase their exposure in the coming year.
The special-purpose acquisition company market also caught the attention of retail and institutional investors this year. Thirty-seven percent of hedge fund and 28% of private equity managers said they participate or are considering participating in some capacity in SPACs.
In addition, public-private crossover funds continued to grow as more traditional liquid hedge fund managers looked to participate in attractive private market opportunities that have been fueling growth and interest within the private equity space for years.
Forty percent of hedge fund managers indicated they have the ability and are participating in private market opportunities.
Meeting Investors’ Needs
According to the survey findings, investor perceptions of value for alternative investments have risen, with 51% of those surveyed saying that the value provided by alternative fund managers has improved relative to a few years ago.
This perception is based on strong alternative fund performance in the face of market and geopolitical uncertainties, as well as on managers’ nimbleness and willingness to customize product and strategy offerings.