At the Crossroads: Investor Demands and Fund Manager Realities

BNY Mellon’s second issue of the Race for Assets series.

By Alan Flanagan and Peter Salvage

March 2018

In partnership with FT Remark, BNY Mellon’s second issue of the Race for Assets series explores in greater detail how fund managers can adopt new operational models in support of future alternative asset growth and investor demands.

Learn more by visiting BNY Mellon’s The Race for Assets series page.

  • Change in the air: 98% of fund managers believe that investor demands are raising the need for new operational solutions.
  • Cards on the table: 59% of investors feel transparency is highly important when considering an asset manager. 71% of managers say they will offer more transparency in the next 12 months.
  • Money talks: Nearly four-fifths of investors plan to seek out lower fees from fund managers. 68% of fund managers say that they will offer lower management fees.
  • Great expectations: The biggest investors (with AUM of more than US$51bn) are the most demanding. 67% of this group feel transparency is highly important. 74% believe that fee structure is highly important.

As assets under management among alternative managers continue to rise (they reached a record US$7.7 trillion in 2017, according to Preqin), institutional investors are becoming more confident in their allocations to the various asset classes.

Yet they are also becoming more vocal about what they expect from fund managers, with fees and transparency high on their list of areas for change.

While BNY Mellon’s survey, The Race for Assets, showed that over half of investors expect allocations to alternatives to grow through the first half of 2018, it also demonstrated that this increased appetite is far from unconditional.

Fees were mentioned by 97% of investors as a factor when considering whether to invest in a fund, with nearly four out of five saying they planned to seek out lower fees. Meanwhile, nearly half (45%) want to see more transparency among hedge funds, and the majority of these (83%) are seeking more information on the underlying assets in a fund.

Evidently, fund managers are listening to these appeals. The Race for Assets reveals that the majority of managers are planning to raise transparency and lower fees in the next 12 months. There is also evidence, particularly among hedge funds, of a shift toward a higher performance element and lower management fees in a move that should align the interests of fund managers and their investors more closely.

Alan Flanagan
Global Head of Private Equity & Real Estate Fund Services, Alternative Investment Services, BNY Mellon

Peter Salvage
Global Head of Hedge Fund Services, Alternative Investment Services, BNY Mellon

This article is provided for general information purposes only and CIBC Mellon and its affiliates make no representations or warranties as to its accuracy or completeness, nor do any of them take any responsibility for third parties to which reference may be made. This article should not be regarded as legal, accounting, investment, financial or other professional advice nor is it intended for such use.

About CIBC Mellon

CIBC Mellon is a Canadian company exclusively focused on the investment servicing needs of Canadian institutional investors and international institutional investors into Canada. Founded in 1996, CIBC Mellon is 50-50 jointly owned by The Bank of New York Mellon (BNY Mellon) and Canadian Imperial Bank of Commerce (CIBC). CIBC Mellon's investment servicing solutions for institutions and corporations are provided in close collaboration with our parent companies, and include custody, multicurrency accounting, fund administration, recordkeeping, pension services, exchange-traded fund services, securities lending services, foreign exchange processing and settlement, and treasury services.

As at March 29, 2024, CIBC Mellon had more than C$2.8 trillion of assets under administration on behalf of banks, pension funds, investment funds, corporations, governments, insurance companies, foreign insurance trusts, foundations and global financial institutions whose clients invest in Canada. CIBC Mellon is part of the BNY Mellon network, which as at March 29, 2024 had US$48.8 trillion in assets under custody and/or administration. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY Mellon trade-marks, is the corporate brand of CIBC Mellon Global Securities Services Company and CIBC Mellon Trust Company, and may be used as a generic term to refer to either or both companies.

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