- Institutional Investors, Broker-Dealers, Wirehouses, Registered Investment Advisors (RIAs), and Wealth Managers will continue to aggressively pursue larger portfolio allocations into private markets.
- RIAs will remain laggards of the alternative investment allocation trend, but will finally find some momentum via dedicated robo-CIO solutions (e.g., Opto Investments).
- Private credit will become the largest gainer of portfolio allocation as Private Equity and Venture Capital lose access to cheap capital. Companies like: Finitive, Percent, YieldStreet, and Fund Ourselves will empower this momentum. Real estate will level out and see limited growth via traditional REITs and platforms like Cadre.
- Deal making efficiency and due diligence transparency will drive higher volumes for non-fund transactions, by usingp latforms like Finitive, eFront, and Deal Cloud.
- Hedge funds will peak, then crash as volatility reduces.
- Government pensions and retirement accounts will continue to increase allocations due to friendly regulations, but will run into mixed results as they select name brands over niche top quartile firms/funds that are mislabeled higher risk.
- CAIS and iCapital will continue to dominate the Alternative Investment Platform middle and back-office technology, but struggle to enter the more competitive space of front office technology. Front-office competitors with expertise across public and private asset classes will be an easier sell to portfolio managers.
- Computer Vision and Natural Language Processing (NLP) will become a standard technology for middle and back-office platforms to adopt. The fundamental solutions of structured data management, won’t cover the broad variable use cases that fall into unstructured data. This will be the only chance of competitors like Addepar, Black Diamond, AltExchange, and Tamarac to catch up to iCapital and CAIS in the mega marketplace category. Many will fail to adopt. Many will use these terms for empty marketing promises. We will be monitoring companies like Canoe, Azure, and Google Cloud Platform for their turnkey solutions.
- Cross asset portfolios analysis will be a requirement of managing private assets. Opto Investments, Addepar, BlackDiamond, AltExchange, and Tamarac will lead in portfolio management.
- Fund administrators and transfer agents will continue to lag in technology adoption and further in margins as they struggle to overcome their legacy systems and poor corporate governance. M&A will be attempted to counter this, but will result in limited positive culture shifts.
- Robo-advisors and free broker-dealers will aggressively pursue M&A and partnerships to jump into private markets in search of higher margins. Robinhood, Betterment, and Wealthfront will be on our watchlist.
- Alternative investment platforms will pursue blockchain technology for AML/KYC and reconciliation solutions (e.g., Securitize, RealBlocks). Europe is likely to lead here due to regulatory trends out of Luxemburg. Most organizations will not get tech into production.
- Co-investment and structured products will become the hot new allocation to synthesize fund of fund allocations.
- Accredited investors and retail investors will continue to struggle to allocate into private asset classes until lower fees become available via synthetic funds. We might finally see the emergence of broadly allocated fund of funds, but not in the traditional sense.
- Synthetic feeder funds/direct investments into funds will continue to be the norm of investments into alternatives, but fees will shrink.
- Lawsuits in alternatives will jump up due to lack of educational materials, robo-advisors guiding broader user adoption, and advisors failing fiduciary promises with lack of understanding the complexities and velocity of change of new products.
- Mega marketplaces will struggle to handle the shift from B2B/B2B2C to B2C as competitors challenge the traditional access of alternatives. Preach “Democratize”, but protect existing revenue streams.
- ESG funds/transactions will remain a focus for the European Union, but will be muted in Americas and Asia.
- Crypto investments will continue volatility as many civil and criminal cases occur throughout the year, resulting in a slew of new legislation/regulation.
- AI/ML with alternative data sources will continue to differentiate investment strategies and drive further competitive advantages for top quartile portfolio managers.
- Largest M&A will center around the purchase of legacy feeder fund business wanting to wind down their costly operational expenses. Mega marketplaces will gain further AUM ground from these transactions.
- The 60/40 classic portfolio will move to the N64 format that contains 60% allocation of public markets and 40% to private markets.
- Companies will continue to struggle adopting platform automation as they overlook the importance of data management. Excel and other flat files will remain prevalent in the systems integration of legacy systems. SFTP and PGP will remain the prominent way to securely share these files. API adoption of fund administrators, transfer agents, and custodians will continue, but run into cultural internal and external adoption barriers.
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