The past decade has been marked by various developments in the investments and securities sector, as well as in the global economic situation. As a result, the hedge fund management industry is set to witness the rise of new trends that portfolio managers and client investors must contend with.
Here is a list of such trends:
Transparency becomes a priority. Following the many controversies in the investments domain, both the government and the investor clients have become keen on examining how portfolio management firms handle the funds under their care. And to keep up with the new laws and regulations created, the industry authorities and the pertinent government bodies have also adopted more thorough processes and advanced technologies to ensure tighter implementation. Real-time monitoring of transactions has become a possibility in these times. Hedge fund managers then face immense pressure to ensure their company’s compliance. Towards this goal, some are adopting more manpower to ensure that the relevant data are collected properly, that reporting deadlines are met, and other transparency-related procedures are conducted promptly.
New markets and distribution patterns will emerge. According to a 2014 report by PricewaterhouseCoopers, assets under management will rise to $102 trillion by 2020. Markets will emerge in the growing economies of Asia, Africa, the Middle East, and South America, and the distribution network will see some changes, as the North Asia, South Asia, Latin America, and Europe are set to build trade linkages. PwC believes that portfolio managers based in North America should act in anticipation of these changes.
Alternative investments to grow. As a result of the increased regulation and demands for transparency and performance on traditional investments, more firms and individuals will be drawn towards alternative investments. Other enticing features of alternative assets include a level of protection from inflation, as well as greater opportunities for asset diversification and exposure. And this sector – which includes hedge funds, private equity, and venture capital – might grow to a $13 trillion in four years.
Amid these changes and developments, hedge fund management firms need to adapt, especially by investing in services and solutions that will help ease their workload. Third party asset servicing firms, for example, can provide valuable assistance in taking care of middle- and back office functions such as accounting, data warehousing, tax and financial reporting, and compliance management. To aid them in these functions, the best ones also invest n top-of-the-line porftolio management technologies.
