Brief: A majority (62 per cent) of private capital fund managers in the UK, Europe, North America and Asia will increase the amount of automation and new technologies used to administer their funds over the next five years.According to a new global study commissioned by Intertrust Group, of these, over two thirds (67 per cent) said they plan to invest in Big Data capabilities while just under two thirds (63 per cent) expect to invest in distributed ledgers such as blockchain.The study, The Future of Fund Technology, found that business size is key in shaping technology investment decisions. Nearly half (47 per cent) of those with AUM of USD3 billion or more stated that it is “very likely” that they will invest in more automation and tech over the next five years. A majority (90 per cent) said they were also more likely to pioneer new technologies and work to utilise new technological advances as soon as they become available.
Brief: Private equity fund managers are accelerating deal timelines in an effort to win bids, and more than half say uncovering risk during due diligence is a main challenge to closing deals, according to BDO’s Fall 2021 Private Capital Pulse Survey. The findings of the survey, which polled 200 US private equity fund managers, underscore the frenzied state of deal making. Forty-two per cent of fund managers say they are directing the most capital to new deals (up from 19 per cent a year ago and 26 per cent in the spring) and deal flow drivers are up across the board. Meanwhile, their pursuit of add-on acquisitions has fallen to 16 per cent from 24 per cent a year ago and 29 per cent in the spring. “To compensate for the slowdown in deal activity at the beginning of the pandemic, fund managers are racing to put committed capital to work and get deals done,” says Scott Hendon, Co-Leader of BDO’s National Private Equity practice. “Everything from private company sales to corporate divestitures is driving more deal flow. Add to that a healthy dose of external influences, such as a potential capital gains tax rate increase and a limited number of attractive targets to absorb all the dry powder on the sidelines, and you have a healthy amount of M&A deal activity—and competition—to contend with.”
Brief: An ASIC surveillance about personal investment switching by directors and senior executives of superannuation trustees has identified concerns with trustees’ management of conflicts of interest. ASIC looked at a sample of 23 trustees (including trustees of industry and retail funds), and focused on conduct during the time of increased market volatility arising from the COVID-19 pandemic. Directors and senior executives of superannuation funds are potentially privy to price-sensitive valuation information. ASIC undertook this surveillance to look into concerns about whether fund executives were using this information for personal gain by switching investment options based on their knowledge of the timing of the revaluation of unlisted assets. The surveillance revealed conduct that fell below ASIC’s expectations. ASIC Commissioner Danielle Press said, ‘We expected superannuation trustees to have robust conflict of interest policies that dealt adequately with investment switching, including by their directors and executives. What we found instead was often a clear failure to identify investment switching as a source of potential conflict, resulting in a lack of restrictive measures and oversight to adequately counter this risk.
Brief: The number of working hours lost due to the COVID-19 crisis will be “significantly higher” than projected just a few months ago, according to the International Labor Organization. In what it termed a “dramatic revision,” the Geneva-based group now estimates that global hours worked this year will be 4.3 per cent below their pre-pandemic level, the equivalent of 125 million full-time jobs. Africa, the Americas and Arab States were the regions that experienced the biggest declines. “A two-speed recovery between developed and developing nations threatens the global economy,” said the ILO, which had forecast a loss of 3.5 per cent in June. “This great divergence is largely driven by the major differences in the roll-out of vaccinations and fiscal stimulus packages.” The organization cited estimates showing that a full-time job was added to the global labour market for every 14 people fully vaccinated. “However, the highly uneven roll-out of vaccinations means that the positive effect was largest in high-income countries, negligible in lower-middle-income countries and almost zero in low-income countries,” it said.
Brief: Hedge funds protected investors in September, even as traditional investments suffered in last month’s declining markets. Almost every global equity market index lost ground in September. But PivotalPath’s composite index, which represents more than 40 hedge fund strategies, was up 0.1 percent for the month. That puts September’s outperformance of 4.7 percent, relative to the S&P 500’s decline of 4.6 percent, in the top 10 percent of all months since January 1998, according to the hedge fund research and data firm. Hedge funds also held their own as the Nasdaq declined 5.3 percent and the health care and technology sectors lost approximately 6 percent. Hedge funds have been on a good run. PivotalPath’s composite index, which includes all of the hedge fund strategies the firm tracks, was up 11.3 percent in 2020, its best year since 2013. Traditional long-only strategies were hit hard by fears of inflation, rising energy prices, and supply chain hiccups. “But as worries about inflation became frenzied, energy, utilities and industrials hedge fund strategies were the second-best performer for the month, exactly as predicted,” Jon Caplis, CEO of PivotalPath, told Institutional Investor. The energy, utilities, and industrials category was up 1.8 percent last month and was the fifth best performer of all 40 strategies covered by the firm.