Alternative fund managers are showing an increased appetite for risk, focussing on acquisition opportunities in the coming year, according to a recent study by Ocorian.
The study indicates a significant shift in investment risk attitudes compared to last year. It reveals that 57% of senior executives expect their organisation’s investment risk appetite to grow in the next 12 months, a substantial increase from the 25% who anticipated a decrease.
The change in sentiment is attributed to more attractive pricing for potential acquisitions, expectations of lower inflation and increased opportunities for distressed purchases.
Despite these optimistic projections, there are still major concerns among fund managers. The possibility of inflation not falling, global political uncertainty and high acquisition prices remain significant worries. Political uncertainty was cited by 26% of firms expecting a decrease in investment risk appetite, while 27% pointed to inflation and 22% to deal pricing as reasons for their caution.
In response to these varying risk landscapes, companies have focused on enhancing risk mitigation strategies. Over the past year, 56% have expanded their risk management teams, and 53% have invested in new technology. Additionally, 45% have expanded employee incentive schemes (EIS) to retain key staff.
Looking forward, firms continue to prioritise risk mitigation, with plans to further enhance EIS, expand risk management teams and increase investments in technology.
The study also highlights factors influencing investment risk appetites, including deal pricing, inflation trends, distressed acquisition opportunities, and the potential for falling interest rates.
Paul Spendiff, head of business development – fund services, at Ocorian, said, “Investment risk appetite is clearly increasing with senior executives and major investors expecting a shift in global macroeconomic conditions as well as more opportunities for acquisitions at more attractive prices.
“The optimism about the year ahead and growing confidence is tempered by a focus on risk management and there is evidence from the study that companies have invested this year in new technology and risk management staff in order to expand in the year ahead.
“That focus is being maintained, and we are seeing growing demand for our services as we help our clients solve these complex issues. In addition there are major concerns about the year ahead ranging from global political uncertainty and heightened global tensions in the Middle East and Ukraine as well as the risk of recession in major economies.”
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