Rising pressures and demands on returns and reporting, means that alternative asset managers must build their operations to scale to cope with increasing volume and complexity.
State Street found that just 57% of the 122 managers surveyed across geographical regions interviewed said their investment operations are sufficient to meet those challenges, and as much as 70% recognise that they will have to spend more on data storage, management, and analysis.
In Asia Pacific, alternative fund managers “need to harness the power of technology and data to compete effectively in a very competitive and fast changing market,” said Mostapha Tahiri, chief executive officer for Asia Pacific at State Street.
Despite market instability, shifting business models and pressure on asset valuations, the vast majority (82%) of alternative managers surveyed believe their organisation has been effective at responding to increasing investor demand for transparency and additional types of data. However, when highlighting areas for improvement, 57% positively rated their companies data management, but less than half (48%) said they have a good level of efficiency and effectiveness in their business’ technology systems, which underpins their use and management of data.
“With more than 80% of alternative asset managers in Asia Pacific saying they will need to invest more in data management and analysis, it is clear that they recognize a technology-led approach is critical to setting themselves apart from competitors,” said Tahiri.
“As a result, we expect outsourcing to gain momentum as firms, especially for rising managers in Asia Pacific, will turn to external service providers to make the best use of their expertise, scalability and technology.”
ESG data management
Moreover, while many alternative managers are at very early stages of planning for ESG implementation, their clients will place a greater focus on their ability to provide transparency and detailed reporting on their actions in this area.
According to the survey, more than three quarters (76%) of alternative managers expect analysing and reporting ESG data to be important for their firm’s future success, with 21% saying it will be extremely important. When it comes to individual alternative asset classes, 75% believe ESG will be of increased importance to private equity. This was followed by infrastructure (68%), hedge funds (61%) and private debt (58%).
“The global pandemic has accelerated not only ESG integration among alternative managers in Asia Pacific, but also investors’ demand on transparency around the ESG profiles of their portfolios,” said Tahiri.
Throughout 2020 State Street announced a series of strategic partnerships to bolster its alternatives offering for clients. For private markets, State Street forged unique alliances with the iCapital Network and Virtus to provide data management platforms that help clients accelerate launches, establish scaled access to wealth management channels, automate administrative processes and monitor performance.
