Alternative fund executives remain confident in their brand despite economic uncertainty, poll

Date: Tuesday, November 29, 2011
Author: HedgeWeek

According to the results of a poll by SEI, the majority (63 perc ent) of alternative investment managers are optimistic about their firm's prospects over the next three years, and of those, a full 50 per cent feel this way due to the strength of their brand.

In the poll, conducted at SEI's Annual CFO Forum for Alternative Investment Managers in New York, participants felt the institutional channel offered the greatest opportunity for asset growth (74 per cent), specifically naming pension plans and foundations and endowments as the most attractive segment. Geopolitical and economic uncertainties were indicated by 63 per cent as the most significant challenges facing the industry in the next 12-18 months. However, a majority of managers believe that investor confidence is better now than in the direct aftermath of the financial crisis, albeit only slightly.

Participating firms indicated that the top areas for investment in the next 18 months would be portfolio management (25 per cent), or marketing and distribution (25 per cent) functions, while only 4 per cent were planning to invest in investor reporting. Almost 80 per cent of managers feel that the cost of adhering to new regulatory requirements will negatively affect their firm's profitability, yet they were split 50 per cent to 44 per cent as to whether the volume and appropriateness of new regulations was about right or far too burdensome.

Panel discussions dealt with the continued evolution and maturation of the investment management industry, particularly the focus on corporate governance and a structured and responsible approach to outsourcing. Managers believe that addressing the industry's continued institutionalisation is mandatory to attract institutional investors, deal with investors' increasing transparency needs, and remain a profitable business enterprise. Forty-seven per cent of managers cited increasing efficiency as their greatest operational challenge, followed by their ability to reduce costs.

According to Ross Ellis, Vice President and Head of the SEI Knowledge Partnership for SEI's Investment Manager Services division: "Managers are looking to improve their scalability, increase their efficiency, and streamline internal processes. CFOs and COOs wear many hats, and through the increased use of technology and leveraging of third-party resources, they are better able to focus on what's most important while keeping abreast of heightened regulatory requirements."
Several panelists confirmed that while independent third-party administration was an expectation of institutional investors, outsourcing was also a means to positively create an institutional-quality infrastructure.

"Operational infrastructures can be bolstered, providing opportunities for enhanced transparency and internal controls that can improve client relationships and support growth," said Ellis.
The poll was completed by CFOs, COOs, and senior executives across a variety of areas including operations, distribution, and investment management.