Pension funds lead swing to alternatives but can managers cope?

Ocorian report shows global funds are predicting a surge in inflows from multiple investor types, putting pressure on asset managers

Pension funds lead swing to alternatives but can managers cope?
Steve Randall

Global pension funds are among the investor types expected to increase their allocations to alternative investment funds, potentially by dramatic amounts.

A new report from industry service provider Ocorian reveals that 87% of alternative fund managers are anticipating an increase in inflows in the next 18 months.

More than one third of respondents think this increase will be dramatic while just 9% think inflows will stay the same and 3% predict a slight fall.

Private banks are also expected to ramp-up their allocations to alternative investment funds in the coming year or so, with 72% of respondents predicting an increase including 33% expecting it to be dramatic. Meanwhile 20% believe levels will stay the same and just 6% expect a slight fall.

Corporates will also boost their alterative asset holdings with 61% of fund managers predicting a rise in inflows over the next 18 months, 34% calling for dramatic increases, 32% expecting a hold-steady, and 4% seeing a slight fall.

“Our research shows that alternative asset managers are feeling very optimistic about the next 18 months, with increasing levels of inflows across all sectors and in particular from pension funds, private banks and corporates who want to reap the benefits that alternatives can bring – helping to lower volatility, enhance returns and increase diversification,” said Paul Spendiff, Head of Business Development, Global Funds at Ocorian.

Managers under pressure

However, this revenue comes with ‘strings attached’ with investors requesting more bespoke reporting, transparency and detailed asset-level reporting, he added.

Ocorian’s research shows an across-the-board expectation for higher inflows to alternatives funds including from insurers, high-net-worth individuals, family offices, and individual investors.

But this demand is putting pressure on asset managers.

“These requests are stretching the operational teams of even the largest alternative asset managers leading them to turn to firms such as Ocorian to support their investor reporting,” Spendiff concluded.