State Street has published its findings from a survey looking into the actions alternative asset managers plan to take in order to meet the growing needs of institutional investors.
The survey found that just 57 per cent of the alternative asset managers believe their investment operations are built to scale to deal with increasing volume and complexity.
In addition to this, 70 per cent believe they will need to increase the amount they invest in data storage, management and analysis, while only 24 per cent have already done so.
State Street’s survey also revealed that 82 percent of alternative managers surveyed believe their organisation has been effective at responding to increasing investor demand for transparency and additional types of data.
But less than half (48 per cent) said they have a good level of efficiency and effectiveness in their business technology systems.
Meanwhile, when it comes to how alternative fund managers feel current increased uncertainty and risk has impacted confidence in their sector, 44 per cent believe it has increased, 27 per cent think it has fallen and the remainder (29 per cent) feel there has been no change.
Vincent Georgel-O’Reilly, head of the alternatives segment, Europe, Middle East and Africa at State Street, says: “To avoid falling behind competitors due to data inefficiency, alternative fund managers must develop agile and nimble strategies, while stripping out complexities.”
According to Georgel-O’Reilly, the firms that take a strong technology-led approach to meet the evolving needs of their clients will set themselves apart from competitors.
As a result, State Street expects outsourcing to gain momentum as firms will turn to external service providers to make the best use of their data.
For environmental, social and governance (ESG) data management, State Street notes that while many alternative managers are at very early stages of planning for ESG implementation, their clients will place a greater focus on their ability to provide transparency and detailed reporting on their actions in this area.
The survey identifies that 76 per cent of alternative managers expect analysing and reporting ESG data to be important for their firm’s future success, with 21 per cent saying it will be extremely important.
When it comes to individual alternative asset classes, three out of four 75 per cent believe ESG will be of increased importance to private equity.
This was followed by infrastructure (68 per cent), hedge funds (61 per cent) and private debt (58 per cent), the survey highlights.
Georgel-O’Reilly comments: “The global pandemic has accelerated not only ESG integration among alternative managers in EMEA, but also investors’ demand on transparency around the ESG profiles of their portfolios.”
He concludes: “European regulation, such as the ‘disclosure regulations’ related to sustainability, and the climate-friendly expenditure in the EU’s COVID-19 recovery plan, is set to positively influence European firms ESG investing behaviour in the long-term.”
Elsewhere, key findings from a Clearwater Analytics and Sionic recent report found that when it comes to ESG, data is the biggest challenge, with coverage, consistency and comparability ranking as the most cited issues.
