Alternative Investments: Operating models to evolve

What will the post-COVID world hold for alternative investment firms?

Jim Suglia

Jim Suglia

National Sector Leader, Alternative Investments, KPMG US

+1 617-988-5607

Firms have risen to the occasion, protecting their people and driving investment performance. Despite market volatility and other adversities presented by COVID-19, alternative investment firms have risen the occasion, protecting their people and driving investment performance. Now, Jim Suglia, National Leader for Alternative Investments, anticipates what the future will hold for firm operations and cultures as the industry transforms for a new normal.

Video transcript

Hello my name is Jim Sully and I am KPMG's Segment Leader for our Alternative Investments practice. The past 45 days have been truly unprecedented in so many ways and with more uncertainty ahead will no doubt impact our people, our daily lives, financial markets, and the economy.

Our alternative clients in the U.S. have been faced with a lot of adversity over this period. They've risen to the occasion for sure. They've taken care of their people. Their investments have performed. They've been communicating frequently and transparency with their investors. And incredibly they've been doing all of this while almost overnight going into a BCP environment working virtually and making sure that they're managing the risks associated thereto.

While some alt investment clients have had some challenges stemming from market volatility increased credit risk, credit spreads, valuation challenges, overall our clients have performed as anticipated and they see long-term that there's an opportunity for investors to increase allocations to alts as a result of this.

In the near term there may be some redemptions really stemming from client's needs for liquidity purposes and liability management.  I think there will be some impacts and when I think about lessons learned from this there will be some modifications to firm's business models but I think the real impact will be in operating models.

I think if you look at continued feet pressure you think about what it may look like in terms of business in a new norm post COVID-19. And you think of the impact on margins, between fee pressure and maybe migrating into this new norm.

I think there'll be a lot of focus on cost. You know additional outsourcing potentially in the areas of IT, data. Some firms are thinking about consortiums for commoditized types of functions, doing that with some of their peer group.

And then you think about costs and things like digitization and how you deal with fundraising in a digital world that has less people traveling.

Also many of the leaders I speak with are starting to think about the workplace of the future.

I think there's no doubt that it's gonna be a trend to look at additional balance between being in office and working virtually or working remotely but I think there are a lot of risks to that most folks are focused on right now are starting to think about would be associated first and foremost with culture. How do I maintain a balance between in office and virtual working but keep the strong culture we've worked so hard to build over the years? And then the second is obviously a lot of the technology and cyber related risks that would occur when you're dealing with a more virtual environment.

I think there's also probably an opportunity in terms of work space and looking at more collaboration and that will evolve over the years. These are some of the things being discussed today and things will continue to evolve no doubt. The waters may look murky for our clients in this environment today but our industry is known for innovation, for dealing with disruption and adaptation and I have no doubt that we will be navigating these waters successfully.


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