Institutional investors expect greater transparency when investing in alternative assets, mostly with risk management in mind, according to a new survey by Clearwater Analytics.
According to a poll of 254 institutional investors, representing over $10 trillion in assets under management, the two key benefits to achieving greater transparency in alts should be better risk management (72 per cent) and a better understanding of performance (54 per cent).
Fully understanding private market assets is a particular challenge for most investors in alternatives. Nearly three quarters (72 per cent) of investors surveyed are unsatisfied with the level of transparency that they currently have when investing in limited liability companies and limited partnerships, structured vehicles, and pools.
For Luxembourg, which has developed into a European hub for alternative investment during recent years, this survey will be studied with strong interest. Some 14,000 alternative investment funds, mostly targeted at professional investors, have a legal home in the grand duchy.
Appetite remains
The survey also shows that alternatives continue to be viewed favourably. A majority of investors (72 per cent) said that the current economic climate has had a positive impact
on their appetite. When asked what is fueling these positive views, 35 percent said it was because of opportunities for diversification, 20 per cent said it was because they expect alternatives to outperform public asset classes, and 17 per cent said it was because of lower volatility.
These findings, said Clearwater, come at a time when investors are reacting to heightened levels of stress in the banking sector, coming hot off the heels of the collapse of confidence in SVB and Credit Suisse.
Pooled investments
“Despite the clear lack of clarity that many investors feel when incorporating alternative assets into their portfolios, it is perhaps surprising to note that only 14% of respondents have an automated process when analysing pooled investment vehicles,” said Clearwater’s chief revenue officer Scott Erickson in a statement.
“This is a key entry point into private markets for many investors, and without the capability to properly process and account for them alongside more vanilla assets, there is a very clear risk management issue. Put into the context of the recent banking crises that we have been experiencing, it highlights the need for investors to put oversight of their risk exposures back to the top of the priority list.”
Clearwater Analytics is a company that provides investment accounting solution and provides the most trusted investment data aggregation, reconciliation, accounting, and reporting.
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