The Future of Digital Transformation in the Alternative Asset Industry
October 25, 2023
The alternative asset management industry, characterized by its multifaceted portfolio spanning from private equity to real estate, is undergoing a seismic shift, catalyzed by the rapid advancements in digital technology. With the backdrop of an increasingly interconnected global marketplace, stakeholders are looking to enhance efficiency, foster transparency, and drive innovation within their operations. Now is the time for GPs to jump on the digital bandwagon, or they run the risk of falling behind.
If it is not public equity, debt, or cash, it's an alternative asset: real estate, private debt/equity, venture capital, infrastructure, art, etc.
Alternatives managers exert an outsize influence on the overall economy, contributing ~6.5% of US GDP in 2022. The alternative asset industry is transforming the economic landscape while also undergoing a wave of digital transformation itself.
- 18.3 trillion assets under management by 2027
- 6.5% of GDP trough contribution of portfolio companies
- 12 million employed
The democratization of alternative assets means a new asset class available for individual investors, and a new fundraising channel for GPs—part of a secular trend in the fundraising market.
While technology has long supported alternative asset managers, it has historically done so through point solutions and loosely integrated tech stacks. This latest wave of technological innovation in the industry is forcing firms to consider whether their tech stack exists in support of the firm’s strategy or is a key pillar of that strategy. With changing expectations of a maturing investor base, and heavily influenced by the proliferation of applications built in the B2C market, there is now an enhanced need for firms to provide more personalized service to their investors.
Over the past decade, business-to-consumer applications, e-commerce platforms, social media, etc. have successfully prioritized user experiences and engagement as a key part of their strategy. This brought about significant advances in intuitive application design, personalization engines (and the models that run them), self-service portals, infrastructure, and generally speaking, advancements to the entire technology stack required to support fully integrated customer journeys.
This is what today’s investors are looking for: AI curated experiences and frictionless service. Managers can use this to build deeper relationships, and artificial intelligence has created an excellent opportunity for firms to reevaluate existing processes, technology, and best practices, to gain a competitive advantage.
Data-centric architecture, modular applications, and open APIs allowing seamless integration and connectivity have allowed AI and ML to thrive. This has ushered in a trend towards platforms, and away from point solutions. Integrated, all-in-one Salesforce-built CRM and portal platforms such as InvestorFlow provide managers with the functionality and flexibility to scale as the organization does.
Data-centric architecture is allowing the industry to use much more of the information collected on prospects, clients, and portfolio. Firms are personalizing the investor’s journey from the initial outreach and onboarding, through continued servicing. Firms are leveraging AI to analyze professional relationships, historical deal data, years of interactions, and current market conditions to improve the quality of investment decisions and synergies across their portfolio.
As we venture into this digital arena of thought leadership, we aim to provide actionable insights for those steering the course in the complex world of alternative assets.
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