Institutional investors switching to alternatives: survey

Nearly half (48 per cent) of institutional investors expect to shift their investments to alternatives from traditional hedge funds over the next three to five years, according to a new survey by Ernst & Young.

“Hedge funds are experiencing slow growth globally,” said Fraser Whale, the accounting firm’s Canadian alternative funds leader. “With an abundance of low-fee investment options and savvy investors pushing for fee transparency, we’re seeing a bit of a fight for growth in Canada, too. Investors have more options than ever in the alternatives marketplace, and fund managers really need to deliver on their investors’ concerns to stay competitive.”

Read: Investors to consider alternatives amid increased volatility in 2017: survey

Despite expense ratios of 1.84 per cent in 2016, down from 1.95 per cent in 2015, institutional investors think costs can still decrease. Cost-cutting ideas include reductions in the middle or back office, outsourcing and using robotics and automation.

Further, institutional investors want details on hedge funds’ talent management programs. In fact, 75 per cent of them use that information as a key consideration in their due diligence.

This article originally appeared on Benefits Canada’s companion site, advisor.ca.