Part 2 of 2
In part one of this two-part coverage of PricewaterhouseCoopers’ latest report, “Alternative Asset Management in 2020: Fast Forward to Centre Stage,” the company predicted that global alternative assets will increase to $15.3 trillion by 2020. In part two of the coverage, the report predicts that alternative managers will develop more sophisticated market strategies, more focused distribution channels and better recognized brands.
In addition, the report says, many firms “will devote more resources to deciding which investor channels they want to play in, how profitable each of those channels are and how to optimize their chosen channels.”
PricewaterhouseCoopers expects alternative asset managers to continue to move into areas traditionally dominated by banks, such as lending, securitization and financing as the funding gap continues to present considerable new opportunities to them. Others will create partnerships with banks and the largest institutional investors, providing integrated expertise in managing new asset classes and building customized products. At the same time, the report says, they will respond to the demand from investors for standardized products in the form of liquid alternatives and other permanent capital vehicles.
Historically, investment in technology has not been a top priority for many alternative firms. However, all this will change, the report says.
“The next five years will see it become mission critical in driving investor engagement, data-informed decision making, operational and cost efficiency and regulatory and tax reporting.”
According to PricewaterhouseCoopers, by 2020, the shift to data-informed decision-making will lead to improved organizational designs that can make more effective use of third-party administrators, other business process outsourcing firms, and other vendors to achieve operational and cost efficiency.
“Most firms will recognize that success in generating alpha—measuring performance on a risk-adjusted basis, does not on its own guarantee success as an organization,” says Mike Greenstein, global alternative asset management leader for PricewaterhouseCoopers.
“Those managers who are looking not just for growth but for sustainable growth, will develop their infrastructure, have a clear strategy and create robust organizational structures to exploit the opportunities that will emerge in the coming years,” he says. “While they will still manage highly disparate strategies that leverage unique skill sets, operationally they will start to look more homogenous as a group as they seek to create ‘industrial strength’ in their operations and processes.”
He adds that “Durability and profitability will be essential credentials for any alternative firm which has ambitions to follow—or lead—the industry to the centre stage of the investment landscape.”