It’s time to look at alternative assets differently
Historically low interest rates and the enduring effect of quantitative easing are making markets expensive, so investors continue to turn to alternative asset classes where alpha looks better.
But surplus capital and other factors have forced valuations up and prospective returns down. Changes in how we work and live, prompted by new technology, innovative business models, and geopolitical shifts, could render many real assets obsolete while creating opportunities elsewhere. We also see new entrants disrupting the sector, capturing value and market share.
In this report, PwC examines the fundamentals behind this transformation and the changes across the following asset classes:
- Private Equity
- Real Estate
- Infrastructure
- Hedge Funds
- Credit/Private Debt
PDF, 1.2mb
Fresh thinking, agile investing
In our view, investors should act now by focussing on three things as alternative asset management moves towards a new paradigm:
Strategy
It’s time to have a clear view of the changes that will affect alternative asset management tomorrow and to reorganise investment portfolios and teams accordingly.
Large institutional investors might want to reorganise by merging real estate and infrastructure areas, for example, to reflect increasing overlap in real assets. But if these changes are merely cosmetic, they’ll probably just consume resources and be futile.
Technology
All investors must understand the impact of technology on their investments. Increasingly widespread digitalisation, as well as application of artificial intelligence and alternative data, will affect all asset classes.
Over time, we expect to see investors actively investing in and developing new business models – learning from those investments and discovering new value but ultimately embracing technology-driven change.
People
Investors need new skills, and firms need new employment models. Organisations should have the skills to understand the impact of new technologies on investment strategies, or knowledge of emerging markets. We believe this will require asset management teams to become more diverse, with a wider range of commercial experience and geographical presence. Business units should be structured and incentivised to look beyond traditional investment silos, to challenge lazy strategies or to identify the threat of new entrants and new business models.
Contact us
Partner, Global Sustainability Leader, PwC United Kingdom
Tel: +44 (0)7710 157908
Olwyn Alexander
Global Asset & Wealth Management Leader, Partner, PwC Ireland (Republic of)
Tel: +353 (0) 1 792 8719
Contact us
Eric Janson
Global Private Equity, Real Assets and Sovereign Funds Leader, Partner, PwC United States
Tel: +1 617-834-4900
Global Private Equity and Sovereign Investment Funds Tax co-Leader, Partner, PwC United States
Tel: (646) 471 3223
Lauren Furlan
Global Private Equity and Sovereign Investment Funds Capital Markets & Advisory Accounting Leader, Partner, PwC United States