Sector  Insights

Alternative Asset Class Snapshots

October 2013

The alternatives industry is embarking on a new era: one where managers and investors have a unique opportunity to thrive. To take advantage of this new environment, fund managers will need to be flexible and willing to evolve to keep up with changing dynamics.

Private Equity

Private equity managers view investors' demands for transparency as the top driver of change in their industry. In response, they are taking a range of actions: 59 percent of private equity managers are improving alignment with evolving industry standards such as ILPA, BVCA and EVCA and 35 percent of managers are enhancing investor services functions to improve responses to investor inquiries.

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Real Estate

Real estate managers are poised to expand their business over the next five years by adding investment strategies and expanding into new regions. But to take advantage of these opportunities, they will need to address complex challenges.

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Hedge Funds

Hedge fund managers view the changes taking place in their industry as being primarily investor-driven. In response, they are introducing new products and fee structures — but this might not be enough. Most hedge funds have not made fundamental changes to their risk and operational strategies — an issue that will need to be addressed to gain a competitive advantage.

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About the Research

In July 2013, State Street, in collaboration with Preqin, conducted a survey of 391 leading alternative fund managers. Of these respondents, the largest proportion (48 percent) were from the hedge fund management sector with a further 26 percent and 15 percent running private equity and private real estate funds, respectively. The remaining 12 percent of fund managers offered a diverse product range across alternatives.

Fifty-five percent of respondents were from North America, 29 percent from Europe, 10 percent from the Asia-Pacific region and the final 6 percent from other regions.