BLOG. 4 min read
At the ABAC-APFF Roundtable, SS&C was privileged to join industry heavyweights from Asia-Pacific Financial Forum, Mountain Pacific Group, FinCity, Tokyo and Japan’s government Financial Services Agency to discuss what roles governments, regulators and pension funds can play to promote the broader mobilization of Emerging Fund Managers to finance inclusive and sustainable growth.
SS&C provided the view of the Emerging Fund Managers and explained the challenges they face when launching a new fund. Some of the issues are simple and understandable, such as not having a track record, whereas others are limitations imposed by the market, including Custodians and third-party providers.
If we look at Australia, its superannuation pool has surged from around A$148 billion in 1992 to A$3.5 trillion in 2023. The total superannuation balances as a proportion of GDP have grown from being equal in 2010 to around 140% of GDP currently.
Of that growth, there is a consistent investment in private markets. According to a 2023 Industry Super Australia Report, over the next ten years the Australian Superannuation Funds are projected to invest an additional A$31 billion in private equity. An estimated A$41 billion will be allocated to unlisted property, and A$36 billion to unlisted infrastructure, totaling approximately A$100 billion. Interestingly, a significant portion of these investments by superannuation funds will be directed towards emerging fund managers.
Why the Growth in Emerging Fund Managers?
The growing trend of investing in emerging fund managers is driven by their potential to generate high returns and alpha, as indicated by 88% of surveyed LPs, SS&C Research found. These managers also provide investors with greater access to unique investment strategies (70%) and facilitate long-term partnerships (61%) more easily. Diversification of benefits (42%) is another key factor considered when partnering with Emerging Fund Managers.
Asia Pacific leads in terms of the likelihood of investing in emerging fund managers (69%), followed by Europe (64%) and North America (44%). Interestingly, the allocation plans of funds considering investments in emerging fund managers over the next 12 months are consistent, regardless of whether the fund's assets under management are around US$5 billion or exceed US$25 billion. This indicates that the focus is more on investment strategies and types, rather than solely on the size of the funds. In terms of allocation plans, LPs are shifting away from hedge funds and reallocating towards private equity, debt, and credit in the next 12 months.
An operational upgrade to boost fundraising efforts
While emerging fund managers are gaining attention, they often encounter significant challenges when launching a new fund and also during the LP's due diligence review, which can be burdensome. The SS&C report also highlights additional hurdles such as limited resources, scalability issues, back-office inefficiencies and inadequate risk management.
In the Asia Pacific region, we work closely with emerging fund managers to address these operational challenges, enabling them and their investors to maximize returns in a demanding market. With our extensive global experience, cutting-edge technology and strong track record, we are well-equipped to empower emerging fund managers in launching their next fund. The proven appetite of LPs presents a valuable opportunity for emerging fund managers’ fundraising efforts. Together, we will overcome the operational obstacles and unlock the potential for success in the thriving super fund space.
To learn more about how emerging fund managers can address these challenges in a difficult market, view our "Embracing the New - Decoding LPs' Perspectives on Emerging Managers" webinar or download our "Embracing the New - Decoding LPs' Perspectives on Emerging Managers" report about LP’s perspectives on these managers.
