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Preqin: ESG and technology will lead alternatives by 2025

Monday, November 30, 2020
Opalesque Industry Update - The ESG value proposition has been accepted by managers and investors alike and has become mainstream in developed markets. A majority of investors and fund managers surveyed for?€?Future of Alternatives 2025?€?believe ESG policies have a positive impact on returns and that ESG will be more important by 2025. The adoption of new technology is also set to be a growing trend in the next five years. Most investors expect digital advances to significantly improve investors' reporting and fund operations and, although 59% of fund managers are currently not using big data, 42% expect to use it more over the next five years. However, there is a difference of opinion on regulation - the majority of investors believe regulation will have a positive effect on alternatives over the next five years, while almost 70% of fund managers view it as having a negative impact.

Dave Lowery, Head of Research Insights:

"Driven by regulations and investor demand, ESG investing has gone from being a niche market to the mainstream and has reached critical mass as of late 2020. Industry professionals already see the relationship between positive impact and investment performance. Investor demand for more information and advances in data analytics will also drive data-oriented organizational transformation; fund managers will need to develop clear data strategies going into 2025. And, while regulation of alternatives assets is increasing and impacting different markets, it is also creating new opportunities; regulations such as carbon reduction will create investment opportunities in technology and infrastructure for energy efficiency, renewable energy, and low-carbon technologies."

Key Megatrends Facts:

  • A majority of fund managers (57%) and investors (58%) surveyed for the Future of Alternatives 2025 believe ESG policies have a positive impact on returns, compared to 20% of both seeing a negative impact.
  • Furthermore, 83% of fund managers expect ESG to be more important in 2025.
  • Europe leads the way in ESG principles adoption, with 63% of the $2.5tn invested since 2010 adhering to these principles.
  • Investors' main concerns are inconsistent reporting and insufficient detail, expressed by 73% and 66% of investors, respectively.
  • However, most of them expect technology to significantly improve investor reporting (74%) and fund operations (62%).
  • Currently, 59% of fund managers do not use big data, though 42% expect to utilise big data tools by 2025.
  • Most of investors (46%) say regulation will have a positive effect on alternatives over the next five years.
  • On the contrary, 67% of fund managers expect regulation to have a negative impact over the next five years.

What do you think?

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