June 30, 2015
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As the asset management industry incorporates improved technology, investments in alternative capital will increase to an expected $15.3 trillion by 2020, according to a new report by PwC.
The PricewaterhouseCooper report argues that assets managed in South America, Asia, Africa and the Middle East (SAAME) are poised to grow faster than those in the developed world. Affluent consumers are becoming more sophisticated and demanding in their asset management expectations, forcing industry players to quickly adapt.
"The shift in global economic power from developed to developing regions will drive continued focus on sovereign investors, fast-growing institutions and the emerging middle classes in new markets," said Mike Greenstein, global alternative asset management leader at PwC, New York.
"These groups of investors will increasingly seek branded multi-capability alternative investment firms. Currently, a number of alternative firms exist in this category and others will aspire to join them," he said.
The "Alternative asset management 2020: Fast forward to center stage" report looks at six strategies for alternative fund managers.
Shifting priorities
To evade the tumult of the global economy, affluent investors are increasingly looking for alternative investment channels that have sustainable, long-term returns.
While alternatives have always been sought, the rise of digital asset management has increased the urgency by arming consumers with more information and channels for communication.
PwC's report calls on players in the industry to begin introducing new distribution channels and create more asset class and product mix.
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The leading firms in this environment will "work to build industrial-strength operational platform."
Categories that will see the highest rise in allocation will be private equity, real estate and infrastructure, according to the report.
This shift will be led by sovereign asset funds, most of which will come from SAAME countries.
Firms looking to adapt to this changing climate will adopt one of three strategies: building, buying or borrowing expertise.
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PwC also expects firms to move into areas traditionally dominated by banks, such as lending and financing, to fill funding gaps rife with opportunity.
Partnerships with banks will also rise to help asset managers better build customized products.
The report asserts that technology has traditionally been relegated to a low-tier priority for alternative firms, but this will now change as the norm becomes data-informed decision-making.
New homes
Although the EMEA region of Europe, the Middle East and Africa are contending with tumultuous variables, several cities are emerging as prime places for real estate investment, according to a new report by Sotheby’s International Realty and Wealth-X.
The ultra-high-net-worth population is poised to experience a massive wealth transfer to the tune of $4.1 trillion from aging generations to younger ones, and much of this money will find its way into real estate, a preferred investment channel for the younger affluent. The report pinpoints the opportunities and drawbacks of significant regions and offers some investment advice (see story).
Also, a confluence of positive developments is recasting the Caribbean as one of the top regions for ultra-high-net-worth consumers looking for sound investments, according to a report by Wealth-X.
Barbados in particular is a market with promising real estate opportunities due to lax regulatory policies and a burgeoning luxury landscape. Behind-the-scenes of this boom in roving real estate interest is an aging UHNW population looking to protect wealth (see story).
While real estate will form only one part of the alternative asset push, players have to be aware of the rising interest in this category.
"Managers who are looking not just for growth but for sustainable growth, will develop their infrastructure, have a clear strategy and create robust organizational structures to exploit the opportunities that will emerge in the coming years," Mr. Greenstein said.
"While they will still manage highly disparate strategies that leverage unique skill sets, operationally, they will start to look more homogenous as a group as they seek to create 'industrial strength' in their operations and processes," he said.
Final Take
Joe McCarthy, staff reporter on Luxury Daily, New York
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