Alternative asset managers expect activity-filled year in 2015
So far in this series, we have taken a broad look at alternative assets and the alternative asset management sector. Now, we’ll look at future trends. What can we expect? How will these trends impact the sector? For the better or not?
Sector will see increased consolidation
The first defining trend to expect is increased consolidation in the sector. Better economies of scale will enable operational cost savings.
In 2014, United Kingdom-based Man Group acquired hedge fund businesses from Merrill Lynch, Silvermine Capital Management, and Pine Grove Asset Management. There were many other such acquisitions last year and more are likely.
Alternative assets consist of many small, manager-driven funds. These funds will increasingly look at succession planning, leading to acquisition by larger players such as BlackRock (BLK), the Blackstone Group (BX), and Invesco (IVZ), which are all part of the Financial Select Sector SPDR Fund (XLF).
Smaller players to focus on niches
To compete with the big players, small players will have to find a niche and focus on it. Otherwise, smaller players will be outplayed by larger firms in terms of cost and geographic reach. These factors are essential to attracting more assets to manage.
Responding to globalization
Globalization is increasingly affecting all companies. This is true in two main respects for fund management:
- The interconnectedness of financial markets can generate better returns.
- Penetrating newer and faster-growing emerging markets can increase the volume of assets under management.
Seizing on these opportunities stands to benefit global players such as JPMorgan (JPM) and Goldman Sachs.