Market conditions and changing investor preferences are creating new challenges for hedge fund managers’ capital-raising ambitions. These conditions are also enabling private equity and other alternatives to gain favor with investors, according to the EY 2018 Global Alternative Fund Survey, titled At the Tipping Point: Disruption and the pace of change in the alternative asset management industry.
The 12th annual survey (formerly the EY Global Hedge Fund Survey) found that 20 percent of investors plan to decrease allocations to hedge funds in 2018, which continues a multi-year trend of slowing allocation appetite for hedge fund products. Conversely, private equity managers are seeing heightened interest in their products. A third of investors (34 percent) plan increased allocations to private equity, while only 9 percent foresee decreases in allocations in the next three years.
“Alternative asset managers are grappling with a whirlwind of changes, and 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 appease 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,” said Natalie Deak Jaros, EY Global Hedge Fund Services co-leader.
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