Emerging alternative investment managers are prioritising the acquisition of top talent, and investments in third-party data providers and technology platforms as they look to grow their businesses in 2023, according to a new report by alternative investments fintech Dynamo Software.
Emerging alternative investment managers are prioritising the acquisition of top talent, and investments in third-party data providers and technology platforms as they look to grow their businesses in 2023, according to a new report by alternative investments fintech Dynamo Software.
Trends, Challenges, & Insights from Leading Emerging Managers, which is based on the findings of a survey of leaders across the global emerging manager marketplace representing a diverse set of funds, including private equity, venture capital, hedge funds, corporate development, real estate, fixed income, small-cap public equity, and private credit, named “increased internal headcount” as the top area of investment to drive fundraising efforts over the next 12 months.
Like their larger GP counterparts, emerging managers do not seem likely to source fee revenue for additional dollars to pay top talent. The same percentage (88%) of GPs Dynamo polled in February and Emerging Managers polled in March indicated their fee structure would remain the same over the next 12 months.
“Creating efficiencies and optimising workflows,” “overall cost”, and “empowering the whole team to leverage tech”, topped the list of reasons Emerging Managers are implementing technology. Operationally, “removing manual data tasks and introducing automated workflows” ranked as the top priority.
Given the prioritisation of data and FinTech, it’s no surprise that emerging managers indicated they will not pull back on their tech budgets. More than half (51%) expect tech budgets to increase over the next 12 months, while another 48% said their budgets would stay the same.
The top three solutions for future inclusion in the emerging manager tech stack were “fundraising and marketing” solutions, “deal management and CRM”, and “investor relations” solutions.
With Deutsche Bank, Bloomberg, and PWC all similarly projecting ESG assets to exceed $100 trillion in five years, more than four out of 10 (43%) Emerging Managers surveyed by Dynamo expect investors will increase ESG and DEI reporting expectations over the next 12 months.
This may be due to the type of investor Emerging Managers are finding success with, beyond the go-to institutional investors. Over the last 12 months, a significant number of Emerging Managers raised the most capital from the private wealth segment, with 32 percent raising the most from high-net-worth individuals and 21 percent raising the most from family offices.
Still, investors trusting Emerging Managers with their money are exercising caution when it comes to early opportunities. Just 13% of those investors are willing to allocate more than 75% of their capital to new investment vehicles. About six in 10 investors (58%) will allocate no more than 25% of their capital to new vehicles.
