The New Institutional Investor Experience

By Jeff Boyd, Chief Executive Officer, Northern Trust Hedge Fund Services
and Megan Greer, Head of Investor Services and Accounting, Northern Trust Hedge Fund Services

As consumers, we’re accustomed to 24/7 access to our banking or brokerage account data and an overall seamless user experience. Now, our expectations of a smooth user experience are carrying over to our work experiences, the business world, and institutional investing – even for some of the most complex alternatives portfolios.

With tech-centric habits in our personal lives, fund managers and institutional investors naturally began desiring a more streamlined experience. Technology and security have evolved to the point where institutional investors can have a secure user experience that is more closely aligned to the one they have come to expect, and many asset managers appear willing to invest in the technology that will help present that experience. According to Northern Trust’s report Driving Growth in Asset Management, 50% of managers plan to leverage new technologies like AI, machine learning and cloud adoption in the next two years.

Traditionally, in working with fund managers and their fund administrators, investors gain insight into the activities and performance of the funds through NAV statements on a monthly or quarterly basis.

These reports are often their only chance to get a glimpse into the performance of their investments, unlike consumers’ ability to access their banking or investment data 24/7. These statements contain static data – only still snapshots into the state of the fund at moments in time without the capability to visualize the data over time and see a fuller picture.

Investors also tend to receive this data in PDF form, without the ability to perform their own analysis through unique filtered views or exported datasets in Excel. To answer their own questions of the data, investors typically must make the request through the manager who takes it to their fund administrator – a lengthy workflow that could be avoided with the help of technology.

Seventy-three percent of institutional investors believe technology advancements will reshape the industry by 2025.¹ We’re seeing that process begin to unfold now.

The arrival of higher-tech methods for investors’ understanding of their data is well timed, as the alternatives industry is becoming more complex while also growing at a significant rate. The global assets under management in the alternatives industry has reached $10.3 trillion and is predicted to reach $14 trillion AUM by 2023.²

The arrival and acceptance of cloud-based platforms makes this kind of data viewing possible, and with it, a whole host of other capabilities that increase investor access to and analysis of their alternative investment portfolios. Before the introduction of cloud-based data analysis technology, investors had static views of the data surrounding their alternative assets but less of an ability to analyze the trends within it. Now, with capabilities such as data visualization, custom data filtering views, document lifecycle and e-signatures, and data export abilities to perform their own analysis in Excel, investors finally have the ability to mine their asset data for deeper insights.

Investors will seek efficient access to these insights even more as their private investment portfolios grow in both size and complexity. Private assets generate an increased degree of data points that investors want to track closely, including transparency of fees, new-issue profit and loss, and committed vs. funded capital.

For institutional investors, the value of gaining access to an upgraded experience and level of data transparency is about more than just their own understanding and peace of mind in their portfolios – it can also drive efficiencies for their internal processes, leading to a measurable business impact via the alpha they generate.

Institutional investors no longer have to settle for a static view of their alternative investment data. Technology has evolved to a point where investors can access the user experience they’re accustomed to as consumers, and let the resulting efficiency gains drive their internal processes. Meanwhile, data analysis has evolved to the point that investors can have more strategic views into their investments. When investors or their investment managers find the right partner to empower them with next-generation data capabilities, investors will benefit from the new investor experience.

¹ Fidelity, “Fidelity Global Institutional Investor Survey: 11th Edition”, 2018.
² Preqin, “Alternatives in 2020”.