PARTNER CONTENT
Dynamo Software’s 2025 survey of asset allocators points to a rapidly evolving market with LPs expecting more from their partners whether that be GPs or technology providers. Dynamo’s CEO Hank Boughner examines the key findings.
Interest in alternatives among asset allocators continues to grow according to the latest research from Dynamo Software. But patterns of investment are shifting, with rising interest in co-investments, an apparent shift in geographical focus from the US to Europe and APAC and, crucially, a more demanding and pragmatic approach to technology.
The Dynamo Frontline Insight Report focused on LPs and asset allocators – now in its fourth year – found interest remained strong in alternatives, with well over half of respondents (54%) saying they planned to increase allocations over the coming 12 months. This has been a consistent trend over the last four years, says Hank Boughner, Chief Executive Officer at Dynamo Software.
“Alternatives are a strategic way to diversify an LP’s portfolio and pursue the potential for higher returns through opportunities that aren’t available in public markets. The sustained interest suggests that LPs are not just reacting to short term trends but viewing alternatives as a strategic part of their long-term portfolio growth. Despite global uncertainty, which has continued to weigh on the minds of LP investors over the four years of our survey, alternatives have remained a stable part of their portfolios,” says Boughner.
But while the interest in alternatives has been consistent, there are new trends emerging in the details.
Co-investments on the rise
Within the alternatives markets there has been a notable increase of interest in direct investments in and co-investments. Dynamo Software’s research found 48% of LPs expected to invest directly in alternatives over the coming 12 months (up from 32% in last year’s survey) while 56% expected to make co-investments (up from 51% in 2024).
The results point towards a shifting mindset among LPs including a growing commitment to long-term relationships in the market, says Boughner.
“Historically, LPs have delegated much of their investment decision-making to fund managers, but co-investments are much more hands-on. This could mean LPs are looking for influence and control over their capital and that they may be interested in the lower fees involved in co-investing, where management fees and carried interest are often avoided or reduced.”
Is a global rebalancing underway?
One of the most dramatic changes identified by Dynamo Software’s survey was an apparent shift in geographical allocations. The headline figures are stark.
Asked to identify the focus for their alternative investments over the coming year 48% of LPs said North America – a sharp decline from last year’s 78%. In contrast, Europe and APAC were named as the focus for 27% and 23% of LPs respectively, both up from just 10% last year.
Boughner, however, warned it was too early to tell whether this represented a real shift in geographical focus.
“On the face of it, this looks like a pullback from North America, but other factors may be at play. We saw an increase in survey participation from Europe and APAC and so these findings could demonstrate a home country bias and not necessarily a retreat from North America, which at 48% is still strong.
“This could signal a more geographically balanced approach, but right now it’s too early to make any declarations,” says Boughner.
Technology investment is key to operations – but LPs are wary of hype.
The vast majority of LPs responding to the survey (59%) said they would be increasing technology budgets over the coming 12 months – the highest proportion in the four-year history of Dynamo Software’s survey.
“It’s clear LPs are looking at the ways technology can improve their operations and internal workflows, particularly when it comes to automation, portfolio management and research tools,” says Boughner. But, he added, LPs also faced significant challenges in selecting and integrating new technology.
“LPs are having to wade through an increasingly crowded market of tech solutions and as they add more ‘point solution’ technology to address single issues, they very tools designed to help them end up adding more complexity and fragmentation,” says Boughner.
The result Boughner said was a double move by LPs to both expand their internal tech capabilities and exercising more scrutiny when investing in external tech solutions.
That increasing scrutiny means LPs are becoming more pragmatic. As Boughner puts it: “They are looking for proven value, rather than chasing the latest market buzz.”
Such hard-nosed pragmatism was also in evidence in the survey findings when LPs were asked which technologies had become ‘overhyped’. Over half (56%) said Metaverse/VR was overhyped, while 45% feel the same about cryptocurrencies and blockchain, and 35% for AI and machine learning technology.
“We can expect to see more scrutiny of investments in these areas in particular,” says Boughner, “and those seeking technology capital should be prepared to demonstrate clear measurable value and return on investment (ROI).”
For Boughner, the findings of Dynamo Software’s latest research – from increased co-investment, a possible global rebalancing in allocations and a greater focus on genuinely effective tech solutions – point to a clear set of opportunities and challenges.
“Traditional models of alternative investing are changing across a number of areas. LPs are reimagining their investment processes through increasingly advanced technology, but they also may no longer want to simply allocate passively and wait for returns. They are seeking impactful investment strategies, often including a bigger seat at the table and GPs will need to stay ahead of these shifts.
“We are entering an era where relationships, data, and operational agility matter more than ever before.”
Hank Boughner, CEO, Dynamo – Hank is a seasoned executive with 20+ years of experience in software and FinTech. He currently serves as the CEO of Dynamo Software, Inc. Backed by Blackstone and Francisco Partners, Dynamo is a leading a high-growth, multi-tenant cloud software platform built specifically for the needs of the alternatives investment sector, including private equity, hedge funds, real estate, venture capital, and limited partners. During his time with Dynamo, Hank has completed multiple strategic acquisitions to augment consistent organic growth. Previously, Hank held senior roles with Goldman Sachs & Co. and Global Payments Inc.
