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Alternative Investments Benchmarking Survey reveals increased spending and hiring plans among asset managers

Friday, January 08, 2021
Opalesque Industry Update - Cutter Associates, LLC, a leading provider of research and consulting to the investment management industry, released findings from its Alternative Investments Benchmarking Survey, uncovering the challenges asset managers face investing in private debt, private equity, infrastructure, real estate, natural resources, and agriculture.

This survey of firms, which represent nearly USD 3 trillion in AUM, examines and analyzes trends over the past decade, as allocations to alternative investments have steadily increased. Survey results reveal that a strong majority (82%) of asset managers plan to increase spending on alternative investment systems and processes in the next 24 months. And more than half of firms plan to increase staff within the same time period."

"Over the past decade, we have seen asset managers grow more sophisticated in how they invest, as they allocate more capital to these assets," said Shankar Subramanian, Principal at Cutter Associates. "But many firms continue to struggle with some of the inherent challenges associated with alternative investments."

"Data is a particularly challenging area for alternative assets processing, namely the lack of industry standards, unstructured data formats, and latency," Subramanian added. "Firms are looking to change that - and 71% told us that they plan to initiate or expand their data integration program."

The Alternative Investments Benchmarking Survey's other key findings include the following:

Front Office

• All firms conduct portfolio/asset modeling and analysis using homegrown spreadsheet-based tools with limited to no automation.

• Most firms (63%) report they would benefit from a system that supports investment monitoring and automated data entry.

• In 76% of firms, performance is calculated by a group outside the front office.

Data Management

• To date, no firms are using AI or ML technologies to capture unstructured data from documents, but about one-quarter have implemented a combination of manual and automated workflows for this purpose.

• 59% of all participants are in the early stages of rolling out a formal data governance program.

Outsourcing

• The large amount of routine manual work has driven firms to outsource many of their operational processes, and many service providers have enhanced their offerings to include services for alternative investments.

• 75% of firms have outsourced some aspects of their data collection.

• 42% of firms have outsourced capital calls processing. And despite increased volumes of capital calls, only 27% of firms have automated solutions to support capital calls processing.

• 60% of firms rely on external parties for valuation - another significant challenge due to lack of transparency and latency.

Technology

• More than one-half of firms provide access to alternative investments data through mobile devices.

• 65% of firms stated that all users have remote access.

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