Investors bank on alternatives and AI for 2024

Limited partners (LPs) and asset allocators plan to prioritise alternatives, generative AI and risk modelling silos in 2024, revealed a survey. 

The ‘Dynamo Frontline Insight Report‘ by alternative investments firm FinTech Dynamo Software and Northfield Information Services found that 93% of investors would either increase (56%) or maintain (37%) their allocation to alternatives. 

When inquired about their plans for alternative investments, 86% opted for “fund managers” as their choice, marking an increase from the 77% recorded in the previous year’s survey.

The second-largest change year-over-year was in the number of limited partners (LPs) and asset allocators considering secondaries (36%), compared to just 28% in last year’s survey. 

LPs also indicated a significant pullback from investment in cryptocurrencies, which the survey attributed to an avoidance of volatile investment strategies.

Generative AI, edge computing, native clouds, automation and hyper-automation emerged as the critical solutions in which they wanted to see fund managers invest.

The desire to spare employees from manual tasks emerged as a priority for the next 12 months, with 93% of LPs planning to increase (49%) or maintain (44%) their technology budgets for the upcoming year. 

Siloed risk assessments stood out as a portfolio-analysis challenge. A significant portion (31%) of LPs and asset allocators employ different risk model frameworks for public assets compared to private assets. The survey pointed out that this disparity hinders them from gaining a complete picture of risks and diversification across their portfolios.

“Regardless of the approach, such workarounds contribute to the number of repetitive, manual tasks taking up valuable employee time,” said Emilian Belev, head of enterprise risk analytics at Northfield Information Service”. “This further explains the prioritisation of finTech to create workflow efficiently.”

LPs said economic uncertainty, automating manual tasks and employee recruitment/retention were the top challenges this year.

© 2023 funds europe

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