Alternative investments industry must innovate say leaders

Industry executives weigh huge technological shift

Alternative investments industry must innovate say leaders

The impact of technology on the alternative investment industry has been a focus at a conference in the Cayman Islands.

With alternative investments predicted to gain in the next five years, attendees of the Cayman Alternative Investment Summit which took place earlier this month were asked for their views on several challenges for the industry and put innovation firmly at the top.

For this year, two-thirds of respondents believe that investing in innovation should be the top priority for CEOs and C-suite executives, far outpacing building trust with employees (19%), evaluating workplace policies (9%) and growing jobs and wages (6%).

"More than ever before, the alternative investment industry is experiencing a dramatic technological shift, and financial services firms realize they will need to incorporate innovation into their investment processes and business operations or otherwise risk falling behind their peers," said Chris Duggan, Director of CAIS and VP of Business Development for event sponsor, Dart.

What’s changing?

The two biggest technology impacts on the alternatives industry are automation and machine learning (45%); and blockchain (38%) which some believe will dominate investment portfolios in the future.

"This year's survey results demonstrate that the alternatives industry has finally reached a tipping point, recognizing the undeniable impact of technology on the future of global markets," added Duggan.

As well as technology, respondents identified other challenges for global markets:

  • Government Instability Causing Volatility: 38% of respondents believe signs of government instability, such as Brexit and the US government shutdown, will be most to blame for a market correction. Other factors driving volatility include a private credit bubble (26%), trade tensions with China (21%), and tightening monetary policy (15%).
  • Investors Divided Over ESG: Nearly 40%of respondents identified pressure from the general public or government officials as the primary driver behind investors' growing interest in responsible investing. This pressure outweighed a commitment to helping solve the world's challenges (28%), recognition of ESG as material to performance (22%), and a herd mentality to keep up with other investors (10%).
  • Cryptocurrency as a Bubble: Investors believe cryptocurrency is the asset class that most represents a bubble right now (45%), as compared to US equities (20%), the leveraged loan market (19%), and private credit (16%).