The increasing focus on governments, and therefore trustees, on cost savings, is driving decision making, not only on the advisers to use, the funds to invest in, but also the types of investment to make, says private equity and real estate manager Altius.
Altius’ latest annual survey on the key challenges facing the private equity industry highlights the growing challenge of providing advice in an environment where overall fees and costs are often considered more important than investment returns.
Jenny Fenton, co-CEO and head of Operations at Altius, comments: “Short termism, long held to be a problem in the public markets, is driving institutions down a path to either a ‘low cost’ commoditized approach or to a higher risk strategy of using co-investments to ‘reduce costs’. In addition, investors are frequently eschewing experienced advisers for general consultants with less experience at an in-depth level in the asset class. Institutions need to achieve good returns in order to meet the challenges of providing for their stakeholders in the future, cutting costs in the short term may make the current cohort of management look good, but it will do little to solve the problem of future liabilities.”
The Altius survey places the Alternative Investment Fund Managers Directive (AIFMD) as the high on the list of challenges particularly for European managers aiming to attract international money as it continues to add uncertainly going forward.
The manager finds that the implementation of the AIFMD has, to date, created confusion, with a lack of clarity in the market on a number of issues.
Jenny Fenton says: “Altius is following the AIFMD developments with interest and some concern. It is hoped that over the next twelve months, a clear consensus will arise on how each element of this directive should be applied for investors, advisers and fund managers alike.”
Fees and Costs Will Continue to Challenge the Private Equity Industry in 2014
The increasing focus on governments, and therefore trustees, on cost savings, is driving decision making, not only on the advisers to use, the funds to invest in, but also the types of investment to make, says private equity and real estate manager Altius.
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