Projections for Next 12 Months in ‘Dynamo Frontline Insight Report’ Reflects Portfolio, Tech, and Talent Trends Spurred by Bear Market

Alternative investments fintech Dynamo Software, in partnership with Northfield Information Services, today released the results from a new survey, Trends, Challenges, & Insights from Leading LPs & Asset Allocators. During the month of September 2022, Dynamo and Northfield surveyed decision-makers within the Limited Partner (LP) and asset allocator marketplace. The research uncovered several noteworthy attitudes, predictions, and strategic plans for the next 12 months.

The survey findings are contextualized in the Dynamo Frontline Insight Report. Among the findings:

Portfolio Strategy

Alternative investments are expected to remain a key strategy for LPs and asset allocators moving into next year. Ninety-six percent of decision-makers participating in the survey said they will either increase (55%) or maintain (41%) their allocation to alternatives.

When asked how they plan to invest in alternatives, respondents overwhelmingly chose fund managers, with 77% selecting that allocation. Co-investments and direct investments followed behind at 55% and 42%, respectively. Secondaries (28%), derivatives (19%) and cryptocurrencies (13%) each made an appearance on the list of top alternatives for 2023, as well.

In light of the many priorities spurred by a bear market, 37% of respondents did not find ESG to be a current priority for their business. Dynamo’s survey insights team expects this may be due to a lack of consensus around ESG definitions, as well as standards for measurement.

Technology

When asked to rank the challenges they are currently facing within their investment processes, participants placed “document collection and/or data extraction” as No. 1, followed by “comprehensive views of portfolio exposures” (No. 2) and “managing risk” (No. 3). It’s no surprise, then, that 94% intend to spend the same (43%) or more (51%) on technology to solve for these challenges.

Nearly 8 in 10 (77%) respondents did not feel all of their current investment processes could be considered “excellent.” In fact, 11% characterized their processes as “poor.” This may explain why the largest percentage of respondents chose “Remove manual data tasks and introduce automated workflows” as the No. 1 priority for their firms over the next 12 months.

Similarly, participants named “portfolio management systems” and “data automation” as the No. 1 and No. 2 most important technology areas to focus on over the next 12 months. “Exposure analysis” came in at No. 3.

Talent

Although “recruiting and retaining talented employees” ranked No. 2 among the most important areas of focus for LPs and asset allocators, respondents also acknowledged the need to empower existing employees as well. The “ability to better enable [our] team to manage new investment structures” was among the top three priorities for 2023, as was “managing key relationships.”

Technology and talent go hand-in-hand, a reality observed in the Dynamo 2023 Frontline Insight Report: “Enacting systems that can keep critical investment data in one centralized location, so that when churn does happen, the business knowledge doesn’t walk out the door with its previous employees, will be a worthwhile focus.”

Further linking tech and talent, survey participants cited technology as one of the most significant initiatives brought about by the pandemic. When asked about the biggest impact of the shift to remote work, 35% chose “the adoption of new technology to improve workflow and communications.”

Increased Focus on Understanding LP and Asset Allocator Strategy

The Frontline Insight Report is the first in a new series of Alternative Investment Research reports to be led by Dynamo. According to CEO Hank Boughner, the research series is a critical initiative for keeping the Dynamo team in lockstep with the power users of its end-to-end software.

“Chasing alpha investments in a bear market can take many divergent paths,” said Boughner. “Research like this gives our alternatives market strategists and product innovation teams a better understanding of which paths will garner the most foot traffic in 2023. They will use that intelligence to ensure our platform is configured to smooth the road to big returns.”

The complete “Dynamo Frontline Insight Report: Trends, Challenges, & Insights from Leading LPs & Asset Allocators” can be accessed at https://www.dynamosoftware.com/alternative-investments-research-series-2022-lp-survey/?utm_campaign=LP%20Survey&utm_source=Press%20Release.

About Dynamo Software, Inc.

Dynamo Software’s mission is to be the leading global, end-to-end cloud software platform for the alternatives ecosystem, serving the information sharing and analytical data needs of our constituents. Since 1998, the company has been providing industry-tailored, highly-configurable investment management, reporting, and data management cloud software solutions to the global alternative investment industry. Dynamo’s cloud-based solutions serve the private investment landscape including: private equity and venture capital funds, real estate investment firms, infrastructure, hedge funds, endowments, pensions, foundations, prime brokers, fund of funds, family offices, and fund administrators. The Dynamo™ platform has improved the productivity across the alternatives ecosystem, including CRM, fundraising, deal management, research management, investor servicing, portfolio management, and compliance teams worldwide. Dynamo has a global footprint with operations across North America, EMEA, APAC, and UAE. For more information, please visit www.DynamoSoftware.com.

About Northfield Information Services, Inc.

Northfield is a leading risk management analytics provider known for its research-based applications and industry wide thought leadership. Founded in 1985, we provide our risk forecasting services to over 200 asset manager and asset owner clients worldwide. We are headquartered in Boston, with offices in London and Sydney. For more information, please visit: https://www.northinfo.com/.

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