Clearwater Analytics Study Reveals 55% of Institutional Investors Set to Boost Their Alternative Investments

Rhea-AI Summary

Clearwater Analytics' 2024 State of Alternatives study reveals that 55% of institutional investors plan to boost their alternative investments over the next five years. This research, involving over 230 executives from sectors managing $10 trillion in AUM, highlights trends, opportunities, and challenges in alternative investments. Key findings show that regulatory complexities are a major barrier, noted by 34% of respondents. Additionally, data and reporting are significant operational challenges, with 28% identifying a need for data standardization. The study underscores the important need for technological innovation to manage alternative investment portfolios effectively.

Positive

• 55% of institutional investors plan to increase alternative investments in the next five years.
• 35% of respondents plan to add to their alternative allocations based on current market conditions.
• 72% of respondents indicated a need to improve operational efficiencies, highlighting the demand for innovative technological solutions.

Negative

• 34% of respondents cited regulatory complexities as the leading barrier to alternative investments.
• 24% identified operational burdens and lack of expertise as significant challenges.
• 15% noted access to quality opportunities as a hurdle.
• 28% of respondents pointed to data standardization as a major operational challenge.
• 19% of participants mentioned management and/or client reporting as critical areas for improvement.

Insights

Financial Analyst

The revelation that 55% of institutional investors plan to increase their alternative investments over the next five years signifies a robust long-term shift in portfolio diversification strategies. This trend underlines the growing confidence in alternative investments as tools for hedging against market volatility and enhancing returns. However, such a significant shift in strategy also indicates that traditional investment vehicles might be underperforming or are perceived as riskier in the current market climate.

From a financial standpoint, this can mean increased capital inflows into sectors like private equity, real estate, hedge funds and commodities. For firms like Clearwater Analytics, which provide SaaS-based solutions tailored to these needs, there lies a pronounced opportunity for growth. Enhancements in their technology offerings that address operational efficiencies and data management will be important to capture market share and retain clients.

Also noteworthy is the regulatory complexity cited by a third of the respondents. This signals the need for not just robust investment solutions but also comprehensive compliance functionalities within these platforms. Clearwater's focus on technological innovation places them in a strong position to leverage these market dynamics, though they must remain vigilant regarding evolving regulations.

Overall, the expected uptick in alternative investments suggests that institutional investors are aligning their strategies to mitigate risks and capture higher yields. For retail investors, this can be seen as an indicator of potential growth in sectors tied to alternative investments.

Market Research Analyst

The study highlights some compelling trends and challenges in the alternative investment landscape. One notable finding is that 34% of respondents identify regulatory complexity as a significant hurdle. This indicates that any advancements in regulatory technology (RegTech) could see substantial demand. Companies focusing on creating easy-to-navigate regulatory environments for their clients may have a competitive advantage.

The operational challenges around data standardization and reporting, mentioned by 28% and 19% of respondents respectively, shed light on critical areas needing improvement. For Clearwater Analytics, this represents an opportunity to refine their offerings to become indispensable to their clients. The emphasis on data standardization suggests a need for better integration solutions across different investment platforms and systems, highlighting an area where Clearwater can lead with innovative solutions.

Given that 72% of respondents seek improvements in operational efficiency, the market potential for Clearwater Analytics and similar service providers is substantial. By addressing these pain points effectively, they could enhance client satisfaction and reduce churn, thereby ensuring steady revenue growth.

The retail investors should perceive these developments as positive for companies within the FinTech space, particularly those that provide comprehensive solutions for investment management and compliance.

New Research Uncovers Key Trends, Opportunities and Challenges for Institutional Investors in Alternative Investments

BOISE, Idaho, May 30, 2024 /PRNewswire/ -- Clearwater Analytics (NYSE: CWAN), a leading worldwide provider of SaaS-based investment management, accounting, reporting, and analytics solutions, today announced the release of its 2024 State of Alternatives study. The report, encompassing over 230 executive participants from sectors including insurance, wealth and asset management, corporate and government entities, pensions and endowments with $10 trillion in assets under management (AUM), delivers an overview of the emerging trends, opportunities and challenges related to alternative investments.

"Alternatives remain one of the most intriguing asset classes across the institutional investing space today," said Scott Erickson, Chief Revenue Officer at Clearwater Analytics. "As investors continue to scan the alternatives market for opportunities, numerous challenges and trends have come into closer view. The 2024 State of Alternatives study highlights key factors and developments that will shape the alternatives landscape over the short-, medium- and long- term."

Download the 2024 State of Alternatives study today. Key findings in this year's report include:

Institutional Investors Plan to Increase Alternative Investments

According to the study, 55% of institutional investors plan to increase their alternative investments over the next five years, while only 6% said they plan to decrease their alternative investments. In addition, 35% of respondents said that they plan to add to their alternative allocations based on current market conditions.

Regulatory Complexity a Leading Barrier to Alternative Investments

Per the study's findings, over a third of respondents (34%) said that regulatory complexities were the leading hurdle in investing in alternatives, followed by operational burdens/lack of expertise (24%) and limited access to quality opportunities (15%).

Data and Reporting Present Biggest Operational Challenges

Per the study's results, when asked what their biggest areas for operational improvements were, 28% of respondents pointed to data standardization, followed by management and/or client reporting (19%), integration with service providers (19%) and better regulatory reporting (16%).

Most importantly, the survey underscores a pressing need for advancements in operational efficiency and software capabilities. A whopping 72% of responses indicated a need to improve all of the focus areas listed.

"We're not surprised by these findings. They indicate a clear consensus around the importance of innovation in technological infrastructure to support the growing complexity and scale of alternative investment portfolios," said Jonathan Flitt, Global Head of Alternative Investment Solutions at Clearwater Analytics. "Our respondents are unanimous about needing better resources and technology to efficiently manage alternative investments and mitigate the impact of the mentioned barriers."

To learn more about Clearwater Analytics, speak to an expert today.

About the 2024 State of Alternatives Study

Clearwater Analytics surveyed over 230 executives across the institutional investor space, including insurers, wealth / asset managers, corporates, government, pensions and endowments with $10 trillion in assets under management (AUM) during May 2024.

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 $7.3 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 percentage of institutional investors plan to increase their alternative investments according to the 2024 State of Alternatives study?

According to the study, 55% of institutional investors plan to increase their alternative investments over the next five years.

What are the main barriers to alternative investments identified in the Clearwater Analytics study?

The main barriers identified include regulatory complexities (34%), operational burdens/lack of expertise (24%), and access to quality opportunities (15%).

What operational challenges do institutional investors face in alternative investments per the study?

The study highlights data standardization (28%), management and/or client reporting (19%), integration with service providers (19%), and regulatory reporting (16%) as key operational challenges.

How many respondents in the Clearwater Analytics study see a need for improvement in operational efficiencies?

A significant 72% of respondents indicated a need to improve all focus areas related to operational efficiencies.

What role does technological innovation play in managing alternative investments according to the study?

The study underscores the importance of technological innovation in managing the growing complexity and scale of alternative investment portfolios.