The technology landscape for alternative asset management is markedly more capable, more comprehensive and better value than it was just a few years ago. But, perceptions continue to lag reality. It’s time to dispel the myths and embrace the power of technology to transform the alternatives industry and better serve investors.
Myth 1: Investors only care about returns
That investors desire strong, sustained returns on their investments is a given, but this is only half the picture. Investor expectations are complex, with increasing focus on environmental, social and governance (ESG) factors and a demand for more responsive, pro-active relationship management. New technologies allow alternative managers to deliver customised reporting and analytical insight, tailored to their investors’ strategic requirements and the best principles of client service.
Myth 2: Alternative managers only use spreadsheets
In a world of complex assets and illiquid investments, front office systems have historically struggled to provide effective offerings for alternative assets, limiting their potential for integration into traditional operating models.
However, as managers began to recognise the potential of technology to cut costs, serve investors and improve returns, software vendors responded by dramatically increasing their expenditure on R&D. Today’s leading alternative managers are embracing emerging technology, and a number of firms are now firmly established as mature providers to the sector. Most excitingly, the potential of alternative data sources to support investment decision-making is creating a vibrant ecosystem of third-party FinTechs.
Myth 3: “We are unique”
Every organisation is different, especially in an industry that spans everything from tokenised property funds to direct credit for avocado farms. However, the nuances of each investment desk should not detract from the opportunity to learn about and adapt to best practice. Managers typically overestimate their own complexity, which can lead them to follow processes designed in the pre-internet era. To succeed in building the operating model of the future, alternative asset managers should exploit the network effects of their adviser ecosystem to adapt and evolve based on leading peer practice.
Many alternative asset managers have only scratched the surface of what technology can do for their businesses. To succeed, firms will need to look up, not down – to their vendors, counterparties and advisors. The technology conundrum is no longer one that can be solved in isolation, even for avocado farmers.
*Ben Lucas is wealth and asset management partner at EY
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