Thu, Mar 28, 2024
A A A
Welcome Guest
Free Trial RSS pod
Get FREE trial access to our award winning publications
Industry Updates

Cerulli: Investment managers address cracks in alternative product development and distribution

Friday, October 07, 2022
Opalesque Industry Update - Both traditional managers and alternative investment managers have made significant investments to bring alternative offerings closer to wealth management clients. However, managers are experiencing internal challenges when it comes to distribution of these products, according to the latest Cerulli Edge-U.S. Asset and Wealth Management Edition.

After a wave of acquisitions, managers are increasingly focused on launching products and aligning distribution rather than acquiring additional capabilities. Revenue potential offered by alternative products is an attractive reason for offering them-among both traditional managers facing fee compression and alternative managers seeking revenue diversification.

Firms face barriers to the distribution of such offerings as the sales process for alternative investment is far more complex than that of the products traditional managers historically have sold. According to the research, the distribution of alternative products is a major or moderate challenge for nearly 70% of asset managers.

Product education-internal and external-is critical. As firms seek to distribute a product not previously offered, they will likely face both cultural and educational challenges. "The educational component cannot be overstated, especially with liquid and intermittent liquidity alternative offerings. The exposures are often complex and return profiles difficult to ascertain," says Daniil Shapiro, director.

Lack of track record poses an additional hurdle to development and delivery, with 63% of managers reporting this as a moderate or major challenge. "This challenge likely is heightened by the large volume of product development activity for intermittent liquidity products," says Shapiro. Other challenges cited in the research include technology implementation and culture clashes that can arise when smaller firms are brought into larger, less specialized organizations.

As firms evaluate bringing a more complex offering to the retail channel, they may change how they select to do so. In-house/affiliate capabilities (100%), acquisition of alternative shops (63%), and hiring/lifting out of professional teams (53%) are the most common methods of manufacturing alternatives. However, in the next three years, managers expect this to change-67% believe they will be increasing reliance on strategic or joint ventures and 67% believe they will be increasing reliance on existing in-house/affiliate capabilities. "While there may be a few cracks in the ecosystem, the industry stands at the precipice of tremendous growth as a confluence of factors-including inflation, the need for income, and simultaneous equity and fixed-income market drawdowns-align to create Goldilocks timing for distributing these exposures," concludes Shapiro.

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1