LPs Look to Boost Alts Investments — Evening Brief – 09.26.24
More than half of limited partners (LPs) plan to increase their commitments to alternative assets, according to a new survey from Dynamo Software and Northfield Information Services. The report revealed that 52% of LPs are looking to up their pledges to the sector, with another 45% expecting to keep their allocations at their current level.
Interest in fund managers and co-investments are also growing as the two most popular reported methods of planned alternative investments, at 72% and 51%, respectively. Derivatives (18%) and cryptocurrencies (8%) were at the bottom of the pile, although each experienced a year-over-year increase in interest, from 15% and 3%, respectively.
A significant portion of participants indicated escalating intrigue in AI – mainly as a category for alternative investment compared to a business enabler for their own operations. When asked in which areas LPs would like to see their technology-focused fund managers invest in, generative AI was the clear winner, named the most important category by 41% of survey participants.
That was followed by edge computing, a rapidly growing technology “expected to play a significant role in the next phase of digital transformation”, the report said. AI features, however, came in last place for LPs as they ranked the components most important to them when implementing a new technology.
Automation, on the other hand – often considered a high-value outcome of AI – ranked high among LP priorities. Automating manual processes ranked among the top three challenges LPs face, alongside managing through economic uncertainty and managing key relationships.
“What may be showing up in the survey results is a skepticism toward technology marketed broadly as AI.” Dynamo software CEO Hank Boughner said. “LPs may be less interested in the components of a tech solution, and more interested in how the solution can help their teams work faster, smarter and with greater predictive analysis.”
“Over the three years we’ve been surveying LPs, we’ve seen a steadily increasing commitment to technology, with plans to increase tech spend every year,” he added.