|
Institutional investors in alternative products regard transparency and risk management as more important than performance when it comes to retaining their managers.
A global survey of more than 200 institutional investors and alternative investment providers, carried out by the Economist Intelligence Unit for PwC, indicates falling returns in a difficult market have triggered greater investor pressure for improved governance and will push fund managers to raise their game.
"Post credit crunch, it is reasonable to assume investors will be looking for a much greater focus on governance, while levels of disclosure processes and procedures will also accelerate as investors become more exacting," said Pars Purewal, UK investment manager for real estate and alternatives at PwC.
Patchy information
The study, which covered hedge funds, private equity, real estate and infrastructure funds, suggested the quality of information given to investors by alternative asset providers remains patchy. Only a small number volunteered information on risk controls and valuation techniques.
The industry, which has grown rapidly in the last few years as investors have made alternatives a mainstream part of their portfolio, was seen as having outstripped the infrastructure supporting it.
North American alternative investment firms were rated highest for quality of governance, risk management reporting and transparency.
Asian firms were viewed as adequate in breadth of reporting, while European ones were found to be less open with only 19 per cent reporting on back office operations and 35 per cent on conflicts of interest. Hedge funds have come under particular pressure as returns have fallen and less than half of respondents were satisfied with their performance.
There is also a drive for greater oversight of the private equity industry, particularly in Asia, where 55 per cent of investors wanted to see guidelines on reporting and 48 per cent wanted formal disclosures to regulatory bodies.
But despite investor dissatisfaction, the report suggested the industry would see further rapid growth in the next three years.
|
