While an uncertain environment in 2024 led to apprehension from investors, fund managers anticipate a change of tides in 2025, with 81% expecting to see an increase in flows to their funds, according to Carne.
Yet, as managers anticipate more investment, 83% also expect market volatility to increase this year. Alternative asset classes could be the benefactor for this environment, with Carne singling out hedge funds and private equity.
Near three quarters of fund managers anticipate higher flows to private equity, while 84% expect an increase in fundraising for hedge funds.
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“Drilling down into the asset classes set to benefit the most from inflows, fund managers are firm in their belief that demand for private markets will continue to boom in 2025, with hedge funds and private equity being the alternative asset classes expected to see the biggest increases in fundraising this year.”
ETFs, which have grown rapidly in popularity over the past few years, are also anticipated to continue growth in 2025. The popularity of the vehicle has led 89% of fund managers surveyed by Carne to adopt the product, and almost all others plan to introduce the product. For managers offering ETFs, they currently account for between 10% and 15% of assets.
John Donohoe, CEO and Founder at Carne Group, said: “With fund managers anticipating a year of increased inflows and product launches, 2025 offers grounds for optimism to a sector that has been contending with significant challenges, from market volatility and continued focus on fees to industry-wide consolidation. For managers looking to embrace this optimism, it is clear that investor demand for alternative asset classes and the growing popularity of ETFs are two of the most critical opportunities for growth over the coming years.
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“Nevertheless, managers will have several challenges to navigate in order fully to seize these opportunities, with our research indicating that increasing regulatory complexity and client pressure for higher standards will be front of mind in the year ahead. At the same time, competition within private markets is becoming fierce, with managers vying to seize the best investment opportunities, deploy funds effectively at attractive margins, and penetrate new client segments for additional capital inflows. Against this backdrop, managers are increasingly recognising that outsourcing non-core functions to third-party specialists can offer transformative improvements in operational resilience and efficiency.”
The drive to access new vehicles, as well as expectations for increased regulation, have led 88% of managers to expect an increase in third-party services in the next year.