Investors know well the challenges they face when searching for new funds. The number of fund managers pitching their vehicle has never been higher, so it is a mounting challenge to distinguish between the next big thing and a flash in the pan. Fund marketing documentation often fails to meet their needs – as between a third and half of surveyed investors across each asset class have reported to Preqin – and so allocators are frequently left without the tools they need to effectively evaluate alternative funds.
This series aims to identify some of the key challenges facing allocators, and demonstrate how Preqin’s platform helps you streamline the fund selection process. In this first instalment, we examine how the sheer size of today’s fundraising market creates challenges for fund allocators.
A Massive Marketplace
Alternative assets under management are expanding at an incredible rate which shows few signs of slowing. In fact, an influx of over 3,000 private capital* funds have come to market this year alone, and all are competing for investment. As at July 2018, there are a record 4,369 private capital vehicles seeking $1.51tn – just three years ago, the total capital sought by funds had not even hit the $1tn mark.
Hedge funds have also seen a boom: in 2015, Preqin tracked around 13,000 funds open for investment, and in 2018 this has jumped to almost 17,000 vehicles.
In this environment, it is imperative to get the necessary information regarding what opportunities are available and which ones suit your priorities. It is a complex task, given the vast array of distinct strategies, structures and niches that now live under the alternative assets umbrella. How can an allocator effectively evaluate how a fund sits alongside its peers when they cannot find that peer group?
We aim to help streamline this process by providing access to the industry’s most comprehensive private capital and hedge fund datasets and tools. We hold information for more than 20,000 alternative assets funds open to investment, ranging from specialist infrastructure funds to multibillion-dollar hedge funds.
The platform allows you to drill down to individual industries and strategies, which place funds in the context of other vehicles using the same approach. We understand that although commitments to mega LBOs and mid-market direct lending may come from the same allocation, they are operating in different worlds. Why waste time comparing apples to oranges?
Preqin’s tools can help cut through the industry to the funds you want to see, but the challenges do not end there. In the second part of this series, we look at the difficulty of judging a fund’s terms against its peers. In the final instalment, we ask how investors can know whether they are leading the pack or trailing behind their own peers when it comes to investing in alternatives.
*Private capital is defined as the closed-end private fund industry comprising private equity & venture capital, private debt, real estate, infrastructure and natural resources funds.