Something Needs to Change: How Alternative Investment Fund Managers Can Improve Communications and Expand Their Markets

Have you seen the statistics? A recent Advisor Brandscape report from Cogent Research states that 68% of advisors are using some sort of alternative investment product. Clearly, they’re finding that utilizing this asset class helps them provide better asset allocation for their clients. And yet the questions remain: Even with this adoption of alternative investments, are managers of large hedge funds and private equity firms doing all they can do to tap a growing RIA market? Or are they missing out on opportunities to expand into the retail advisor space by relying on inefficient, unsatisfactory modes of communication that stifle adoption and growth?

As scale of offering increases, so too does distribution inefficiency.

As fund managers seek to expand beyond institutional investors—and make headway into the RIA market—they must contend with the issue of how their scale of offering is impacting distribution. It’s what I call the “data distribution dilemma.” The fact is, advisors are doing the same thing that institutional investors are doing—they’re investing in dozens of LP offerings across multiple fund managers. But unfortunately, the current method of communicating important financial information via PDF is highly inefficient. It requires that advisors engage in a highly manual, extremely time-consuming process when they update data in their investment management systems. Or as one LP so memorably put it when he described this process for alternatives, “It’s like cleaning bathrooms at the airport.”

PDFs are not the solution—no way, no how.

The burden of manual data collection is continually growing. Advisors keep asking for more transparency—and in response, fund managers keep providing more and more information. But unfortunately, it’s still being transmitted using the same outdated communications methods.

Sure, many fund managers use similar investment management systems that advisors use to manage their portfolios. And yes—the data in question is generally in a structured form in a relational database. But unfortunately, as part of their standard reporting cycle, most fund managers convert this structured data into unstructured data. To make matters worse, they then lock down this unstructured data in a difficult-to-consume PDF format. And while PDFs may be a great way for lawyers to communicate, they’re not so great for integrating data into buy side portfolio management systems. They make for unsatisfied RIAs who may be less likely to adopt alternative investment fund solutions over time.  

Better communication will equal expanded markets for large alternative investment fund managers.

If you want to distribute to advisors, allow them to run their fingers through their money. At the very least, provide them with usable information in your choice of online format on your investor communication portal. Better yet, provide advisors with data they can download with Excel, so they can process all financial information for their clients in a couple of easy steps. If you are a General Partner and would like help distributing investor information in a highly secure manner, please give us a call at ByAllAccounts. We would be more than happy to help. 

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