Clearwater Analytics Study Finds Alternative Investors Undeterred by Economic Uncertainty

Rhea-AI Summary

Clearwater Analytics (NYSE: CWAN) released its 2023 Investor Pulse study, polling over 200 institutional investors managing $10 trillion in assets. The research indicates a shift in investment strategies towards alternatives amidst economic uncertainty, with 72% of respondents expressing increased interest in alternative assets due to diversification opportunities and anticipated outperformance. Notably, 58% of investors remain unaffected by recent interest rate hikes, while 67% reported limited transparency in their alternatives portfolio. Additionally, banking sector challenges prompted changes in cash management strategies, with 31% of investors increasing their bank holdings.

Positive

• 72% of institutional investors favor alternatives due to current economic conditions.
• 58% reported interest in alternatives unaffected by rate hikes.
• Increased demand for diversification and expected outperformance from alternatives.

Negative

• 67% of investors feel limited transparency in their alternative investments.
• Banking challenges leading to cautious investment strategies.

New Research Reveals Emerging Trends Among Institutional Investors and Alternative Investments

BOISE, Idaho, April 26, 2023 /PRNewswire/ -- Clearwater Analytics (NYSE: CWAN), a leading provider of SaaS-based investment management, accounting, reporting, and analytics solutions, today announced the release of the 2023 Investor Pulse: Alternative Investors Undeterred by Economic Uncertainty study. Polling over 200 institutional investors, including insurers, wealth and asset managers, corporates and government, pension and endowments with $10 trillion in assets under management (AUM), the report looks into the key trends, challenges, and successes that institutional investors are prioritizing, given the last 12 months of economic uncertainty.

"Despite wide-ranging market events, from an overall uncertain economic outlook to dramatic increases in interest rates and related inflation, to the most recent challenges in the banking sector, the findings of our study reveal that investors have altered their investment strategies and continue their focus and allocation to alternatives," said Scott Erickson, CRO at Clearwater Analytics. "We launched this research to learn how market events are shaping interest and investments in alternatives and what it could mean for the space as the year continues to play out. As the survey indicates, for investors to effectively manage their industry exposures, they require greater transparency to their alternatives portfolio in order to manage risk and increase yield in the current market environment." 

Download the 2023 Investor Pulse: Alternative Investors Undeterred by Economic Uncertainty study today. Key findings in this year's report include:

Bumpy Economy Boosts Appetite for Alternatives

Per the study's findings, alternatives continue to be viewed favorably. A majority of investors (72%) said that the current economic climate has had a positive impact on their appetite for alternatives. When asked what is fueling these positive views, 35% said it was because of opportunities for diversification, 20% said it was because they expect alternatives to outperform public asset classes, and 17% said it was because of lower volatility. At the same time, 39% said that they "believe all markets will suffer if the economy falters."

"Most investors are wary of the entire investment universe. However, it seems that many believe alternatives to be a good place relative to other market options," said Erickson. "The extended low yield environment drove many investors to invest in alternatives, now rates are up, markets are uncertain and investors are staying the course, if not adding to alternatives. Whether it is in relation to lower volatility or increased diversification, investors are continuing their focus on alternatives, and as the economy continues to stumble, we expect this trend to continue."

Investors Unmoved by Rate Hikes in Relation to Alternatives

Per the study's findings, 58% of respondents said that rate hikes had no meaning or impact on their appetite for alternative investments, while 27% said that rate hikes made them more interested in alternatives and 16% said they became less interested.

"Investors were driven to alternatives in recent years due to the prolonged period of low rates, and as interest rates have spiked, naturally there have been suggestions that these higher rates might ultimately dampen investors' appetites for alternatives," said Erickson. "However, our research has found that not only are most alternative investors unmoved by these spikes, a significant number of respondents actually said they have become more interested in the space as rates have risen."

Alternatives Investment Transparency Significantly Lacking

According to the study's findings, only 28% of respondents said that they felt they had the required level of transparency into their alternative investments, while 67% said their level of transparency was either "modest" or "limited."

"It is important to remember that alternatives aren't a homogeneous asset class, and within a given segment, industry exposures can vary dramatically," said Erickson. "Investors want to manage their industry exposures and that requires transparency in their alternatives portfolio. While this is proving to be a major challenge for many alternative investors today, Clearwater delivers technology to provide clients with the deep dive views needed to solve this problem."

Banking Challenges Impact Overall Investment Strategies

According to the study, investors increasing the number of banks holding their cash and short-term investments (31%), changing the bank(s) holding their cash and short-term investments (28%), and reducing debt/bond exposure (28%) were cited as the most common ways investors had altered their investment strategies in the wake of the recent banking events.

"Clearly, banking sector challenges are making investors more cautious," said Erickson. "It is very likely that we will see more scrutiny on investments in the financial sector and in other industries that are dependent on bank capital moving forward. These findings bear out that approaches to banks are changing amongst investors – at least in the short-term."

About 2023 Investor Pulse: Alternative Investors Undeterred by Economic Uncertainty Study

Clearwater Analytics surveyed over 200 executives across the institutional investor space, including insurers, wealth/asset managers, corporates and government, pension and endowments, aggregating $10 trillion in assets under management (AUM) from late February to early March 2023. To learn more, download the 2023 Investor Pulse: Alternative Investors Undeterred by Economic Uncertainty study.

About Clearwater Analytics

Clearwater Analytics (NYSE: CWAN), a global, industry-leading SaaS solution, automates the entire investment lifecycle. With a single instance, multi-tenant architecture, Clearwater offers award-winning investment portfolio planning, performance reporting, data aggregation, reconciliation, accounting, compliance, risk, and order management. Each day, leading insurers, asset managers, corporations, and governments use Clearwater's trusted data to drive efficient, scalable investing on more than $6.4 trillion in assets spanning traditional and alternative asset types. Additional information about Clearwater can be found at clearwateranalytics.com.

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SOURCE Clearwater Analytics

FAQ

What does the 2023 Investor Pulse study reveal about alternative investments?

The study reveals increased institutional interest in alternative investments amid economic uncertainty, with 72% of investors viewing them favorably.

How have interest rate hikes impacted investor appetite for alternatives?

58% of survey respondents indicated that recent rate hikes have not affected their interest in alternative investments.

What transparency issues are highlighted in the Clearwater Analytics study?

The study found that 67% of investors believe they have limited transparency regarding their alternative investments.

How are banking sector challenges affecting investment strategies according to Clearwater Analytics?

The study indicates that investors are changing their banking strategies, with 31% increasing the number of banks holding their cash and short-term investments.

What is the significance of the 2023 Investor Pulse study for Clearwater Analytics?

The findings underscore Clearwater Analytics' role in providing transparency and management solutions for alternative investments amidst an uncertain economic landscape.