At the Crossroads: Investor Demands and Fund Manager Realities

March 2018

In partnership with FT Remark, BNY Mellon’s second issue of the Race for Assets series explores in greater detail how fund managers can adopt new operational models in support of future alternative asset growth and investor demands.

Learn more by visiting BNY Mellon’s The Race for Assets series page.

• Change in the air: 98% of fund managers believe that investor demands are raising the need for new operational solutions.
• Cards on the table: 59% of investors feel transparency is highly important when considering an asset manager. 71% of managers say they will offer more transparency in the next 12 months.
• Money talks: Nearly four-fifths of investors plan to seek out lower fees from fund managers. 68% of fund managers say that they will offer lower management fees.
• Great expectations: The biggest investors (with AUM of more than US$51bn) are the most demanding. 67% of this group feel transparency is highly important. 74% believe that fee structure is highly important.

As assets under management among alternative managers continue to rise (they reached a record US$7.7 trillion in 2017, according to Preqin), institutional investors are becoming more confident in their allocations to the various asset classes.

Yet they are also becoming more vocal about what they expect from fund managers, with fees and transparency high on their list of areas for change.

While BNY Mellon’s survey, The Race for Assets, showed that over half of investors expect allocations to alternatives to grow through the first half of 2018, it also demonstrated that this increased appetite is far from unconditional.

Fees were mentioned by 97% of investors as a factor when considering whether to invest in a fund, with nearly four out of five saying they planned to seek out lower fees. Meanwhile, nearly half (45%) want to see more transparency among hedge funds, and the majority of these (83%) are seeking more information on the underlying assets in a fund.

Evidently, fund managers are listening to these appeals. The Race for Assets reveals that the majority of managers are planning to raise transparency and lower fees in the next 12 months. There is also evidence, particularly among hedge funds, of a shift toward a higher performance element and lower management fees in a move that should align the interests of fund managers and their investors more closely.

— Alan Flanagan
Global Head of Private Equity & Real Estate Fund Services, Alternative Investment Services, BNY Mellon

— Peter Salvage
Global Head of Hedge Fund Services, Alternative Investment Services, BNY Mellon