New ALTS Investing Survey Shows Optimistic Outlook Among General Partners; Economic Uncertainty Less of a Factor Compared to 2023

Several findings from a newly released survey of General Partners (GPs) and asset managers indicate economic uncertainty and recessionary fears may be having less of an impact on overall business and alternative investment strategy. The survey results were published today in the "2024 Dynamo Frontline Insight Report: Trends, Challenges and Insights from Global General Partners (GPs)."

Among the findings was an apparent reduction in the effects of financial volatility on planning. One year ago, one in three GPs surveyed by Dynamo Software said economic uncertainty was making forthcoming fundraising activity too hard to project. This dropped by 11 points in the most recent survey.

GPs also appear to sense a rebalancing of power in the GP-LP dynamic following a recession that never materialized and the potential for fund overperformance in 2024. As compared to 2023 respondents, a significantly larger percentage of 2024 survey participants indicated they will increase their management fees over the next 12 months. Twenty percent said they expect to raise prices this year. Just 5 percent planned to do so last year.

Expectations for higher fee income may have influenced how GPs answered other questions related to the cost of doing business. Ninety-two percent of GPs said their tech budget would either increase (50 percent) or stay the same (42 percent). Notably, "overall cost" dropped year-over-year from third to fourth place in the ranking of most important factors to consider when implementing new technology. "Creating efficiencies and optimizing workflows" retained its position as the most important tech implementation factor in 2024's survey.

Paradoxically, "artificial intelligence (AI) and machine learning (ML) integration" ranked last among GP's technology priorities.

"The fact that AI ranked lower than expected did not go unnoticed by our technologists," said Hank Boughner, Dynamo CEO. "We believe this may be a reflection of how GPs are thinking about AI overall. In our conversations with asset managers, AI is largely being considered for its impact on portfolio companies, not necessarily on GPs' own productivity. That day will come, however, as AI's capabilities come into clearer view."

Investment strategy also seems to be influenced by less apprehension about the economy. The vast majority of respondents plan to either increase (43 percent) or maintain (52 percent) direct investment allocations. What's more, unconventional bets, such crypto, appear to be more palatable to GPs this year. Last year, zero respondents said they planned to increase crypto investments; this year, 7 percent said they would. At the same time, a full 66 percent of respondents said they plan to remain focused on a single asset class, such as private equity or hedge funds. Just over 25 percent, on the other hand, expect to diversify to multiple asset classes.

Similarly, a greater number of GPs are considering European opportunities. In 2023, just over 11 percent of GPs said they were looking to deploy capital primarily in Europe. That number doubled in the new survey with 22 percent expecting to put capital to work across the pond. This may change as news of Europe's H2 2023 recession enters into H1 2024 strategy conversations. Plans for Asian opportunities also went up, from 4 percent last year to 8 percent this year.

The complete "Dynamo Frontline Insight Report: Trends, Challenges and Insights from Global General Partners" can be accessed at Dynamo's website.

About Dynamo's Frontline Insight Reports

Published quarterly, Dynamo's Frontline Insight Reports contain primary research obtained through online surveys of targeted alternative investor audiences. The survey results are contextualized by Dynamo subject matter experts in formal Frontline research reports. To date, Dynamo's research team has focused on delivering noteworthy insights related to the attitudes, predictions, and strategic plans that Limited Partners (LPs), General Partners (GPs), and Emerging Managers have on a number of alternative investment topics. To learn more about Dynamo's research reports, visit the Resource Library or contact [email protected].

About Dynamo Software, Inc.

Dynamo gives alternatives investors a Performance Edge, empowering them to efficiently scale their firm to capitalize on the growing wave of private market opportunities. With the Dynamo Alternative Investment Platform, Limited and General Partners can now run a tightly integrated firm, putting all their data to work to accelerate operations across front, middle, and back office, unleashing teams to work smarter, and allowing leaders to make better investment decisions and scale their firm. Dynamo has a global footprint with operations across North America, EMEA, APAC, and UAE. For more information, please visit DynamoSoftware.com.