SS&C Intralinks recently published the seventh annual 2023 LP Survey, in association with Private Equity Wire, to provide a global overview of limited partner (LP) sentiment as it relates to the performance and resilience of alternative asset portfolios. The findings cover a variety of themes influenced by economic and geopolitical challenges like rising interest rates, inflation, global energy-supply crisis, conflict in Ukraine and more. We asked 200 global investors for their responses to the pressing questions that general partners (GPs) want to know the answers to.
One highlight from the study is that alternative asset portfolios performed better than expected in 2021, despite uncertainty. With 86% of investors reporting that performance met or exceeded their expectations, 70% said they expect to increase their allocation to alternatives over the next 12 months. Private equity generated the best risk-adjusted returns for more than 36% of investors, followed by venture capital at 18% and hedge funds at 16%.
We asked investors their preferred sector to invest in, and technology remains the favorite at nearly 30%. Sectors with growing interest include renewables and infrastructure.
ESG policy is a priority, with nearly 49% of LPs planning to increase their ESG due diligence. ESG data can be used to establish the risk profile and future performance of a portfolio company, and ESG is becoming more important for a manager’s ability to generate alpha. The interest in ESG is expected to keep increasing, with more than a third of investors reporting that they are willing to divest from a manager if they are not supplied with an updated ESG policy on an annual basis.
Communication will be key for GPs looking to improve their relationships with their LPs. Our respondents indicated they want more of an effort to meet in person or more frequently over virtual calls, as well as standardized reporting and better quality digital communication tools. One of the biggest frustrations reported in the survey was relying on disparate dashboards with multiple logins.
