In large part, as a result of this, the number of liquid alternative funds grew by 226% between 2008 and 2014 and the expectation is that this growth will continue, because it is part of the ongoing evolution of the asset management space more generally as it continues to edge its way toward centre stage within the global financial system. And, it is likely to be driven primarily by three factors: a government-incentivised shift to individual retirement plans; the increase of high-net-worth-individuals from emerging populations; and the growth of sovereign investors.
These three factors, when combined with the loose monetary policy that has been evident in most developed markets since the crisis and the concomitant rise in traditional asset prices, has created the need for more tailored, outcome-based alternative products that provide capital preservation, but provide upside opportunities, the firm says. It will also require alternatives asset managers to “more consciously evaluate what they are as an organisation and where they want to be.”
In the retail space, PwC writes, the decision for traditional managers will centre on exactly how to enter the market if they have not done so already, while for alternatives managers the “unique portfolio liquidity needs and different (lower) fees” the question will be if they should participate.
“It therefore represents the potential for a classic alliance of distributor and manufacturer,” PwC says , “In a fragmented market where traditional firms and alternative firms do not yet see each other as peers, they will need to figure out how to coexist and even work together.”
The question for the sector is whether or not the various players are able to take the opportunity quickly enough.
