Majority of Alternatives Managers Optimistic About Prospects

November 28, 2011 ( – Sixty-three percent of investment managers surveyed by SEI at its Annual CFO Forum for Alternative Investment Managers are optimistic about their firm’s prospects over the next three years.

Of the 63%, a full 50% feel this way due to the strength of their brand. The poll also found that respondents felt the institutional channel offered the greatest opportunity for asset growth (74%), specifically naming pension plans and foundations and endowments as the most attractive segment.

An SEI Quick Poll in August found 78% of pension executives say their plans have an alternatives allocation, a steady increase from 53% in 2009 and 65% in 2010. However, SEI’s poll also found fewer plans allocating more than 10% of their portfolio to alternatives—42% of those with more than $300 million in assets, compared with 77% in 2010. (See Running the Fund: Considering the Alternatives). 

In the current poll of CFOs, COOs and senior executives across a variety of areas including operations, distribution and investment management at alternative investment management firms, geopolitical and economic uncertainties were indicated by 63% as the most significant challenges facing the industry in the next 12-18 months. However, a majority of managers state investor confidence is better now than in the direct aftermath of the financial crisis, albeit only slightly.

Participating firms indicated that the top areas for investment in the next 18 months would be portfolio management (25%), or marketing and distribution (25%) functions, while only 4% are planning to invest in investor reporting. Almost 80% of managers feel the cost of adhering to new regulatory requirements will negatively affect their firm's profitability, yet they were split 50% to 44% as to whether the volume and appropriateness of new regulations was about right or far too burdensome.

Forty-seven percent of managers cited increasing efficiency as their greatest operational challenge, followed by their ability to reduce costs.

According to Ross Ellis, vice president and head of the SEI Knowledge Partnership for SEI’s Investment Manager Services division, "Managers are looking to improve their scalability, increase their efficiency, and streamline internal processes. CFOs and COOs wear many hats, and through the increased use of technology and leveraging of third-party resources, they are better able to focus on what's most important while keeping abreast of heightened regulatory requirements."

Several panelists confirmed that while independent third-party administration was an expectation of institutional investors, outsourcing was also a means to positively create an institutional-quality infrastructure.