Alternative investment professionals reveal bullish outlook for private equity, EisnerAmper survey finds

NEW YORK–(COMMERCIAL THREAD) – Alternative investors see continued opportunities in the private equity industry after a record year, according to a new survey of alternative investment professionals by accounting and consulting firm EisnerAmper. The survey, which was conducted during the 6th edition of EisnerAmpere Annual Alternative Investment Summit, found that half of respondents (51%) expect private equity to be the asset class that LPs increase investment allocations the most over the next 12 months , with 27% and 22%, respectively, indicating venture capital and hedge funds.

Private equity has overtaken venture capital and hedge funds as the sector that alternative investors see as the most conducive to ESG investing over the next three years. However, obstacles to implementing ESG remain, with alternative investors citing the lack of standardized reports and datasets (48%) as the biggest obstacle, followed by the search for investment opportunities. quality (20%) and dispelling the notion of poor returns (17%).

The survey also found that the world’s second-largest economy is still highly investable as 92% of private equity and venture capitalists have not changed their investment strategy in China amid recent regulatory crackdowns against private companies. Only 3% of hedge fund professionals selected China’s regulatory crackdown as the factor expected to have the most impact on hedge fund investments over the next 12 months.

When asked to name the two industries with the best investment potential for the remainder of Q4 2021, 50% of all respondents cited technology. Healthcare / life sciences was cited as one of the best sectors by 39% of respondents, and infrastructure (23%) rounds out the top three. Notably, while technology and healthcare / life sciences were cited as the top sectors in the 2020 survey, there was increased interest in infrastructure compared to last year, when it was not. received only 9% of the vote.

“Despite the lingering effects of the COVID-19 pandemic, a new administration and ongoing geopolitical events, 2021 has been a very good year for alternative investment managers,” said Peter Cogan, Managing Partner of the Services Sector financial institutions of EisnerAmper. “The survey found that investors are adjusting their strategies to take advantage of these micro and macro trends to generate alpha.”

Private market investors expect increased interest from LPs in growth stocks and impact strategies

When asked which strategies private market investors expected LPs to increase their allocation the most over the next 12 months, growth stocks (37%) and impact (31%) are appeared as the most popular. Differentiated strategies can give companies a head start while facing high valuations in a competitive landscape, which has been identified as the factor that could have the most impact on private equity and private equity investments. -risk over the next 12 months.

On the hiring front, PE and VC professionals are looking to strengthen their investment teams in order to capitalize on the hot trading environment. Forty-five percent of companies plan to hire for their investment teams in the next 12 months, up from 27% in 2020, while 31% plan to hire for their operations teams. Outsourcing has also gained popularity in private markets, with 61% of companies already outsourcing back office / middle office functions or planning to do so within the next 12 months.

However, PE and VC professionals are aware of the challenges their industries face in the future. The top two challenges for the next 12 months were cited as increasing capital gains tax rates and escalating regulatory oversight / compliance obligations. While topics such as deal-making and trade policy have dominated conversations about the challenges of these industries in recent years, it is clear that PE and VC professionals have shifted their focus elsewhere.

“PE and VC have had a solid year on the deal front, and we expect this trend to continue as LPs are eager to invest and investment teams look to hire,” Cogan said. . “There are definitely tax and regulatory challenges, and we are seeing companies address them by outsourcing some of their back office and middle office functions to service provider experts while they are ‘they focus on their portfolios and LPs. ”

Hedge funds diversifying their strategies; slower to adopt AI and ESG

As long / short and global macro strategies continue to be the bread and butter of hedge funds, a third of respondents expect LPs to increase their investment allocation to events over the next 12 months , followed by credit (25%) and quant (17%). The high number of corporate actions throughout the year, including mergers and acquisitions, restructurings and the rise of the retail investor, could explain the increased interest in the event strategy. When asked to name the main challenge for their business, hedge fund executives noted an escalation in regulatory oversight and compliance requirements (30%) followed by an increase in capital gains tax rates. (27%).

The EisnerAmper survey also found that hedge funds are slower to adopt artificial intelligence and machine learning to make investments or trades, with 85% of respondents saying their hedge fund does not use these. tools. ESG implementation follows a similar trend. Only 17% of executives said their company had an ESG portfolio, which is similar to the number of executives who reported it in last year’s survey.

“There has been a surge in investor interest in hedge funds this year, propelled by global growth, fiscal stimulus and low interest rates,” Cogan said. “We continue to see investors deploying more capital in the asset class to diversify their portfolios and generate returns.”

With a fireside chat with Barbara Corcoran and Daymond John of ABC’s Shark Tank, as well as speakers from the Institutional Limited Partners Association, Cota Capital, New Holland Capital, Glazer Capital and other leading alternative firms , EisnerAmper’s 6e The annual Alternative Investment Summit took place virtually on October 7, 2021. EisnerAmper’s survey incorporated feedback from 184 event attendees, which included CFOs, COOs, CIOs. , CEOs, controllers, portfolio managers and operations specialists from across the alternatives industry.

About EisnerAmper

EisnerAmper, one of the world’s largest business consulting firms, is comprised of EisnerAmper LLP, a licensed independent CPA firm that provides client attestation services; and Eisner Advisory Group LLC, an alternative practice structure that provides business advisory and non-certified services in accordance with all applicable laws, regulations, standards and codes of conduct. Customers are in all industries and benefit from a comprehensive menu of service offerings. Our combined entities include more than 200 partners and more than 2,000 employees. For more information, please visit eisneramper.com, and be sure to follow us on Twitter and LinkedIn.

The EisnerAmper Financial Services Practice Group, made up of the Asset Management Group and the Capital Markets Group, is the largest industry group within EisnerAmper, dedicated to serving more than 2,500 financial services clients. Thanks to a local presence in the main international markets and EisnerAmper Global, an international network of accounting firms, we provide our financial services clients with expertise where they do business, raise capital and invest. For more information about our services, please visit www.eisneramper.com/FS.