Altum’s mega trends predictions for 2024 and beyond
Kicking off 2024, Altum Group’s Chief Commercial Officer Stephen McKenna shares his predictions and trends that’s set to dominate the market.
Talent war
Estimates suggest that the global talent shortage could reach 85 million people by 2030 and despite the increasing importance of technology, our industry is still a people business. As the growth of alternative assets continues, financial service providers are at the sharp end of the war for attracting and retaining top talent. This is emphasised further in jurisdictions such as Luxembourg, Dublin and the Channel Islands which are premium fund domiciles of choice. In today’s competitive landscape. each business will need to differentiate itself in the recruitment market and work hard to retain the talent they have.
At Altum Group, we proudly foster a vibrant work environment emphasising mentorship, fun and embedding ESG, CSR and inclusivity at the core of what we do. Our commitment to these principles contributes to exceptional staff retention and team satisfaction. Proof is in the 90% staff retention rate we boast which is among the highest in the industry.
Additionally, businesses need to look at how they can increase efficiencies and automation in order to ensure they are able to provide the service required in a challenging employment market.
Digitalisation and digitisation
COO’s and CFO’s are already looking at how they digitalise their businesses and in particular the operating model. Automation of manual processes is the tip of the iceberg, the automation will be driven by consistent, clean and complete data, for many this second aspect is far more difficult to execute on.
Digitalisation is the way to create effective data to automate manual or disconnected tasks in a cost-effective manner. Automating manual tasks not only helps combat the talent war mentioned earlier but it improves quality control and mitigates risk. Key considerations for any COO and CFO.
We all want and need good data QUICKER AND FASTER
Asset managers need access to good data to make good decisions and they are increasingly looking to their service providers to assist them with this. We know asset managers want more sophistication around how they collect, manage and hold their data and we believe they will increasingly look for third parties to do this, we are well positioned to share our thoughts and actions with current and prospective managers.
Inflation to settle down
Inflationary pressure appears to be reducing following the most recent statistics and it is expected that interest rates will settle before potentially starting to come down towards the end of 2024 and beyond. This will have a positive impact on allocations to alternative investments, however, this is not likely to be consistent across the sub-sectors that make up what is referred to as alternatives.
In a higher interest environment, investors have the option of lower risk strategies such as US treasury bonds which currently have a yield of 5% which hasn’t been available for over 15 years. Although this competition could have a negative impact there is evidence that alternatives can significantly improve a portfolio’s diversification in a higher interest environment.
Within the alternative asset sectors, it is potentially private debt that is best placed to benefit from the current rates. With a higher interest environment, private debt should produce better returns given it is largely structured with floating instruments, however, it would also increase the risk of default given the pressure placed on borrowers. This pressure would also cause the banks to reduce their lending further and private lenders will need to step into the gap.
Retalisation
Given the difficult fundraising environment over the last few years and UHNW’s looking to diversify their portfolio risk, the retalisation of alternative assets would look like a match made in heaven, and although there are challenges that will need to be overcome this is an area that has gained a lot of focus recently. As the toolkit is improved to facilitate this, such as the roll out of the revised ELTIF regulation (ELTIF 2.0), 2024 could be the year that the professional investor really makes an impact on the alternative investment world.
Consolidation
In an interview with the FT in September 2023, Partner’s Group CEO, David Layton suggested that the current 11,000 private market asset managers could be reduced to over 100 in the next decade. Capital certainly appears to be flowing to the bigger players which makes life difficult and as a result an increasing number of mid tier managers have been acquired. There has been considerable consolidation in the service provider market too but with noise increasing around integration difficulties and high staff and client attrition it will be interesting to see if this trend will continue long term. For asset managers it looks inevitable that there will be further consolidation in 2024 and probably 2025 but should the fundraising environment improve perhaps this trend will not prevail for the entire decade.