The consensus is clear: investment in alternatives instruments are growing. The Preqin Investor Outlook: Alternative Assets, H1 2019 pegged global AUM in alts at a record $9.44 trillion as of June 2018 (the latest data available) [1].
But that is only half the story. Even as assets are heading up, they are also broadening, as investors seek diversification beyond hedge funds in their quest to outperform traditional equity markets. While hedge funds still command a multitude of alternative allocations (40%, according to EY), they are experiencing a bit of competition [2]. Last year was the third-highest private equity fundraising year on record, and private market AUM reached an all-time high of $5.8 trillion, according to McKinsey’s 2019 Global Private Market Review [3]. Private credit, meanwhile, is on track to hit $1 trillion in AUM by 2020, says the AIMA’s Alternative Credit Council [4].
If institutional investors want diversification, alternative fund managers are ready to accommodate them. In the EY 2019 Private Equity Survey, nearly a quarter of hedge fund managers said they currently or plan to offer private equity investments. One-third of private equity (PE) firms are branching into real estate, real asset, and venture capital funds. And, both hedge and PE firms are forming private credit vehicles to attract more of their clients’ capital [2].
Once they cross into another lane, however, many fund firms are running into an operational roadblock. Can their hedge fund management platform support private equity portfolios, or something as challenging and complex to account for as real assets? Can it support both open-end and closed-end structures? Can it provide accurate accounting and servicing for limited partners who are invested in multiple asset classes or fund types?
The fact is very few solutions exist that can support multiple fund types, strategies, and structures without a patchwork of costly custom integrations. Moreover, according to EY, “Many private equity CFOs recognize they still have a long way to go before they build a sophisticated IT infrastructure.” [2]. A proven solution serving the alternatives market for years, Geneva was designed to support complex, multi-asset strategies, and we’ve continued to adapt and reinvigorate its capabilities and functionality as the alternative marketplace has evolved. Today, with built-in support for both open- and closed-ended fund structures, Geneva enables fund managers to trade in, account for, and report on virtually any alternative fund type.
If you’re already on Geneva, talk to us about your expansion plans, we value the strategic partnership with your firm. If you’ve run up against the limitations of your current processes, check out the Five things you need to know about Geneva and let’s discuss how Geneva is here to support your evolving asset class diversification needs.
Sources:
[1] Preqin Ltd. Preqin Investor Outlook: Alternative Assets, H1 2019. 2 April 2019
[2] Ernst & Young LLP. How do you see the opportunity in your obstacles? 2019 Global Private Equity Survey.
[3] McKinsey & Company. Private markets come of age: McKinsey Global Private Markets Review 2019 McKinsey Global Private Market Review 2019.
[4] Alternative Credit Council 2017. Financing the Economy 2017: The role of private credit managers in supporting economic growth.
