in AUM in 2019
$100 ~ $500
Data aggregation is becoming a key technology requirement for investors as they look for managers to
deliver more robust reporting. But the most important technology tool cited by investors is portfolio and
risk analytics. LPs want a clearer picture of performance and risk exposure, not just on an individual asset class basis but on an overall aggregate basis, in order to make better investment allocation decisions.
This is further proof that knowing the source of alpha in their portfolios remains top of mind among investors.
Co-investing remains a popular preference among LPs as they seek to strengthen their relationships with managers and put more investment capital to work, beyond fund commitments.
The majority of investors (54 percent) have a modest deployment target of US$50 million, but nearly one quarter of investors said they would target US$50 to US$100 million. This is likely to benefit
mid-sized managers, as investors look to ‘right size’ their co-investment targets.
Portfolio & risk analytics cited as the most important technology tool by
of LPs citing them as their most underweight allocation
From a risk-return perspective, investors overwhelmingly cited private equity as the best-performing asset class. More than four times as many investors cited this asset class, compared to hedge funds, which only garnered 13 percent of responses, as did private debt.
While public market investment returns remain subdued, the results would seem to suggest that within private markets, equity rather than debt is the standout performer. Low interest rates are no doubt hampering private debt performance, especially in Europe.
Private equity leads on risk-adjusted returns, attracting
of LP responses
Perhaps amid global macro concerns, with China and the U.S. still embroiled in a trade war, investors would appear nervous over the choppiness of market conditions and how this could impact hedge funds and commodities.
Both asset classes were cited as the biggest underweight allocation by 28 percent of global LPs surveyed.
Good news for mid-sized managers, with 54 percent of investors preferring funds with (USD)
Mid-sized managers have the opportunity to seize the moment in 2019, with more than half of investors surveyed confirming their preferred AUM fund manager size will be US$100 – US$500 million.
This would suggest investors are looking for niche, specialist fund strategies as a way to access uncorrelated sources of alpha, less readily achieved among large fund managers.
More than half of investors have modest co-invest deployment target of up to
Hedge funds fall out of favor, with more than