Private equity and hedge fund managers alike are finding their investor base is challenging what products fit best within their portfolio and, in many cases, no longer want a “one size fits all”, according to EY’s 12th annual Hedge Fund Survey, which has been released under the new name of the Global Alternatives Survey.
The survey – ‘At the Tipping Point: Disruption and the pace of change in the alternative asset management industry’ – explores specific disruptions that are impacting all asset managers, and finds that, while overall allocations to alternatives are steady, investors seem to be challenging large allocations to hedge funds. Only seven per cent plan increased allocations in the next three years. On the contrary, 34 per cent of investors plan to increase allocations to private equity.
The survey also highlights that new product development is the driving force in blurring the lines between a hedge fund versus a private equity fund. As investors seek more control and customisation, managers are competing more than ever, with almost 30 per cent of hedge fund managers having a private equity offering, and 20 per cent of private equity mangers having hedge products.
Managers and investors alike are also finding digital tools like next-gen data, robotics, and AI to be critical in the front, middle and back offices. Hedge funds are further ahead than private equity firms. Looking at AI specifically, 74 per cent of PE managers have no intention of using AI, compared to only 40 per cent of hedge funds. Over half already use or plan to use the technology.
According to the survey, over half of managers list talent management as a top three strategic priority. The survey reveals that hedge fund managers seek new skillsets in data and analytics and private equity firms are focused on gender and cultural diversity given the people-first mentality of deal-making.
