January 21, 2016
At recent meetings in New York, London, and Boston, Cutter Associates revealed insights from their latest research into private equity (PE) and real estate (RE) investment processing to CTOs, CIOs, and other senior officers of the world’s largest investment management firms. Their findings, delivered in published reports, live presentations, and interactive forums, included analysis of vendor offerings, industry trends, and investment management practices.
Increasing investor demand for returns that are uncorrelated to the overall market is driving the growing portfolio allocations to alternative investments. Among the firms participating in the Cutter research, more than 90% are now invested in alternative assets—an increase of 11% over what CutterResearch reported in the spring of 2012. And virtually all participants are planning to increase these allocations.
Real estate and private equity assets are among the alternative investments in high demand. Half of the firms participating in the Cutter research are planning to increase their investments in real estate, and almost 40% are planning to increase their investments in private equity. In fact demand for private equity and real estate funds is outstripping supply, and many firms are turning instead to direct RE and PE investments.
Despite the increase in private equity and real estate allocations, there has been no corresponding increase in spending on new technology to manage these assets. Almost all of the participating firms are satisfied managing their RE and PE investments with their existing solutions. Instead of looking for new technology, the firms are focusing on finding sources of more comprehensive data and on improving front office capabilities to better identify promising RE and PE investment opportunities.
Jamie Plassmann, Senior CutterResearch analyst, observed that, “Because customers have been reluctant to replace existing systems, vendors are getting creative in their efforts to entice them to spend. For example, vendors who’ve offered tailored PE and RE solutions for years are adding front office functionality to try to expand their footprint within the firms of their existing customers.” Some vendors are adding sophisticated analytics tools to support risk management, portfolio construction, and performance measurement. Others are adding or improving functionality for mobile access or workflow management. And some are providing portals to streamline communications between investors and fund managers. To more quickly expand their product functionality, some vendors are forming strategic partnerships and integrating third party technology. Others are expanding their offerings through company acquisitions.
The full, 150-page CutterResearch report on Alternative Investment Systems includes assessments of 25 vendor offerings, including detailed technical evaluations of 11 offerings. It also delivers relevant, timely, practical insights into investment management trends, best practices, and operational challenges. The report is available exclusively to CutterResearch members on the website at www.cutterassociates.com
About Cutter Associates, LLC
Cutter Associates, LLC serves the operational and technology needs of the global asset management industry, providing clients the tools and services they need to be successful. By leveraging multi-faceted expertise and an unrivaled knowledgebase, Cutter Associates provides clients truly independent research, exclusive member-only events, custom operations benchmarking, and a global consultancy for strategic advice on and delivery of operational and technology excellence. Cutter Associates works with the world’s leading asset managers, providers and servicers. Headquartered in Hingham, MA, Cutter Associates has subsidiaries in Canada and the UK, and is on the Web at www.cutterassociates.com