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Alternative Market Briefing

Investors are sticking with alternatives but are putting pressure on managers to focus on ESG, succession planning

Friday, November 15, 2019

Bailey McCann, Opalesque New York:

Investors are continuing to allocate to alternatives, but they're choosing private equity and real estate over hedge funds according to EY's latest Global Alternative Funds Survey. Investors also want to see a robust talent management strategy and greater alignment with ESG principles to ensure that their alternatives investments provide value over the long-term.

Hedge funds continue to make up the largest percentage of investors' allocations to alternatives, but they are quickly giving up market share. Performance challenges along with fee pressure are making things difficult for hedge fund managers. Private equity has been the direct beneficiary in terms of picking up new allocations, but the amount of dry powder sitting on the sidelines in private equity is also pushing investors to consider real estate and other strategies. According to the report, investors expect this trend to continue over the next two to three years.

Data in the report shows that hedge funds and private equity have also started offering hybrid products and more customized products in an effort to capture new assets. 58% of hedge funds surveyed said that they were offering co-investment or best idea portfolios to investors through separately managed accounts. 41% of private equity firms surveyed said they were offering private credit, CLOs or other financing opportunities alongside traditional comingled private equity funds.

On the business sid......................

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