The environment and implications from COVID-19 demonstrated that — in times of market volatility and business uncertainty — alternative investments fulﬁl an important role in an investor’s portfolio. Throughout the pandemic, the Hedge Fund industry has shown its ability to manage risk and volatility while still producing above-market returns for investors.
Moreover, the sector proved itself to be highly adaptable and resilient in the face of massive market disruption. Operations not only continued in an unprecedented decentralized setting, but worked almost seamlessly with little or no interruption. Trades were executed during periods of record volume, margin was extended, collateral was posted, and trades were settled. Subscriptions and redemptions took place as normal, Net Asset Values were issued, and risk information was exchanged.
Indeed, the COVID-19 experience has proven that many managers’ operations and their ecosystem’s capabilities are robust, that some processes can be managed virtually, and that — even during the lockdowns — the industry remains agile and resilient.
The data, and KPMG ﬁrms' and AIMA's conversations, with industry players suggest the environment is creating new opportunities for the industry. Many see the current market disruption and dislocation as an opportunity to attract new talent to their ﬁrms. They see opportunities to re evaluate their existing business operating models and adjust their core processes, cost structures and work environments. They are channeling increased investment into their Investor Relations (IR) functions to enhance their capabilities. And they are ﬁnding ways to propagate their culture and encourage collaboration in a decentralized environment.
At the same time, the data points to an accelerating bifurcation in the industry. Generally speaking, the survey suggests that larger, more established players are better postured to attract increasing amounts
of talent and capital. Smaller, less established players, on the other hand, may be seeing competitive advantages ﬂow from less complicated operating models and greater ﬂexibility.
In the summary that follows, we share the high-level results from eight key themes that have been underscored by the Alternative Investment management industry as a result of COVID-19. From talent acquisition and changes to the IR model through to technology investment and cost management, this report provides key insights into how the industry is ﬁnding opportunities in a decentralized environment.
Signiﬁcant uncertainty may remain, but the conversations with fund managers and data suggest the industry remains adaptable and resilient and is taking prudent steps in order to embrace the new reality.